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4 BASIN RESOURCES
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BP’s $4 million donation
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San Juan College School of Energy has bright future
Museum expansion
Road to Largo Canyon a complication for Mancos shale development
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40
Mock rig disaster
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10
Saying thanks
20
Gross GAS Production
38
Photo contest
44
Advertising directory
46
Sharpe: There’s a lot of wells to be drilled
Five Mile Bridge
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WPX, Hurricane Swabbing hope for the best and plan for the worst
New wing will create a one-stop shop for energy education
The Mancos Shale
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Tom Dugan recongized by IPANM for a lifetime of achievements
www.basinresourcesusa.com • Fall 2012
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Editor’s note It’s no secret the oil and gas industry has hit a rough patch over the last couple of years. When the cost for dry natural gas dropped to a decades-low price, producers in the Basin were hit hard. However, as always, the ingenuity and persistence of people in the San Juan Basin continues finding innovative ways to move forward. The Mancos Shale, resting roughly 5,000 to 12,000 feet below the Basin is said to be rich in oil and other liquid fuels. It has the possibility to revive the Basin, and George Sharpe, investment manager for Merrion Oil and Gas, says that the oil and gas is out there and will be for many years to come. Merrion recently entered into a lease agreement with Bill Barrett Corporation of Denver, Colo., to come into the area, construct horizontal wells, and drill on Merrion-leased land in the Mancos Shale. Sharpe said there are 125,000 acres Merrion has leased to Barrett and, with the proper spacing of one well for every 160 acres, there could be 156 wells. In this issue, we also look at getting the Mancos Shale payload out of Largo Canyon and across the Largo wash. San Juan County has been looking at upgrades to the Five Mile Bridge. The one-lane bridge is one of
only two roads leading into and out of the area. The bridge needs some work to keep the heavy equipment and trucks moving in and out of the area. There is also a possibility that the area may see a compressed natural gas station here before too long. City and county government has discussed converting vehicles to run on natural gas. Encana and the New Mexico Natural Gas Vehicle Coalition came to Farmington to discuss the feasibility of building a natural gas station here for fueling personal vehicles, buses and trucks. Recently, BP American Production Company gave the School of Energy at San Juan College $4 million to go toward building a new School of Energy facility. Tim Harrington, BP North American Gas regional president, feels this investment is about transforming energy, and that starts with the individual training. “This is about legacy and how we can keep that legacy,” Harrington said. The Farmington Museum is also interested in continuing the legacy of our oil and gas development by expanding the energy wing of the museum to 7,500 square feet. Looks like the boom and bust cycle is turning again to the positive for the Basin.
publisher Don Vaughan editor Cindy Cowan Thiele designers Suzanne Thurman,
Michael Billie Jennifer Hargrove sales staff DeYan Valdez,
Jeanene Valdes, Teia Camacho, Shelly Acosta, Aimee Velasquez For advertising information
Call 505.516.1230 ©2012 by Majestic Media. Material herein may not be reprinted without expressed written consent of the publisher.
www.basinresourcesusa.com • Fall 2012
8 BASIN RESOURCES
iPANM presents a strong case to change the Pit rule During the summer of 2012, the Independent Petroleum Association of New Mexico was involved in the hearings before the Oil Conservation Division, or OCD, to amend the pit rule (Rule 17). IPANM had filed a separate petition from the New Mexico Oil and Gas Association, or NMOGA, in order to best represent the interests of our membership. We initially only differed on the theory of applying Rule 17 statewide. Our Board voted in October 2011 also to include an amendment to require application of Rule 17 to all counties in the state, including Otero and Sierra counties. In January, however, the commission ordered a severance of the IPANM case in order to litigate the Otero Mesa issue after the conclusion of the pit rule hearing. The three main goals for the IPANM petition to the pit rule were: 1. To simplify Rule 17 2. To eliminate the requirements for closed loop systems 3. To allow for more on-site burials With these three goals in mind, IPANM presented its case through the detailed testimony of Tom Mullins, principal of Synergy Consulting, and Larry Scott, founder of Lynx Petroleum. Scott testified to the negative economic impact of Rule 17 on the state to provide the commission with a rationale for amending the rule. To simplify the rule, IPANM felt that the notification requirements to the Santa Fe office had to be changed, notification to surface owners had to be eliminated and the application, closure and vari-
KAriN FostEr ExEcutivE DirEctor iPANM ance process had to be streamlined. IPANM opposed any increased regulatory burdens in the protection of livestock and public safety, which were two additional protections added to the last NMOGA petition at the request of the New Mexico Cattlegrowers Assoc. Scott testified that requesting a variance did not need to become a hearing process or a popularity contest based on the number of regulatory folks on staff. Instead, Scott advocated for increased communication and certainty in the rule, with set extension provisions and set time limits for the regulators to determine the validity of a permit application or face automatic approval, rather than the indefinite denial, as is the current standard. Elimination of the permitting or registration of closed loop systems also required significant discussion of the industry understanding of what a closed loop system really was used for, which is solids control equipment that will vary from well to well. Therefore, requiring notification of use for workover operations was irrelevant to this rule, and requiring that the operation meet “engineering principles” also would set operators up for potential violations based on some subjective determination by a regulator. Finally, IPANM felt that our science would demonstrate there
would be no impact on ground water with the use of earthen pit locations at a prescribed distance from water. Since that science indicated little or no migration of harmful contaminants, there would be no need to test or haul those cuttings when the depth to groundwater was greater than 100 feet from the bottom of the pit. Scott completed extensive reviews of rig counts in several states including New Mexico, Oklahoma, Wyoming and Texas. He estimated if production levels remained flat for the time periods subsequent to Rule 17, as they had in Texas, instead of the decline that occurred, this represented a loss of $6 billion in economic activity to New Mexico and $600 million in direct lost tax revenue. Mullins testified for IPANM as an expert in the field of petroleum engineering. He completed an extensive review of prior modeling done for the 2007 and 2009 pit rule hearings by the OCD, and Daniel B. Stephens on behalf of NMOGA. He also reviewed each case of alleged ground water con-
tamination claimed by the OCD and found not one case was actual contamination of ground water during the operation of a drilling reserve pit. Mullins did modeling for the 25-foot to ground water sitting and the 100-foot to ground water for deep trench burials requested in the IPANM petition and found the impact to ground water from the chlorides on a pit was so minimal that levels were below detectable limits in several instances and in all cases the level of chlorides in ground water was less than clean water drinking standards. Mullins concluded by saying his modeling showed scientific proof the IPANM proposed Rule 17 amendments, if implemented, would be protective of human health, the environment and fresh water as designated by the state engineer. On Aug. 28, the Oil and Gas Accountability Project put on a rebuttal witness to contravene Mullins’ testimony on modeling. They were “uncomfortable” with the inputs Mullins had used in the model, but would not explain why or present a valid alternative. Similarly, they discussed several cases in the OCD files of alleged instances of soil impacts as the result of an unlined earthen pit. All the cases were prior to 2009 when the current version of Rule 17 was implemented. None of OCD’s testimony contravened any of the professional opinions rendered by Mullins that the IPANM proposal was protective of human health and the environment.
www.basinresourcesusa.com • Fall 2012
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10 BASIN RESOURCES
New wing will create a one-stop shop for energy education Lauren Duff For Basin Resources The Farmington Museum has worked tirelessly to record the San Juan Basin’s deep-rooted history in energy production, and they’ve run out of space. To encourage the public to learn more about the impact of oil and gas production in the area, the Farmington Museum at Gateway Park is expanding its energy wing. This expansion will supply
more room for existing exhibits and new additions. “We have been working on this a very long time and one of the things that is very timely about the project is energy has become such a hot topic,” said Bart Wilsey, museum director. This project has been ongoing for about 10 years, he explained. “We were fundraising for an expanded exhibit, so it has taken a little time.” Existing exhibits, such as the Dinosaurs to Drill Bits exhibit, will be moved to the new wing, said Tom Cunningham, curator of exhibits. The popular geovator will also be revamped and moved.
www.basinresourcesusa.com •Fall 2012
BASIN RESOURCES 11
Farmington museum energy exhibit Floor Plan During the Feb. 28 Farmington City Council meeting councilors approved a $13 million bond issue, and $2.5 million is going towards the energy wing expansion, Cunningham said. Right now, the wing is 1,500 square feet and the new wing is estimated to be 7,500 square feet. Conron & Woods Architect firm in Santa Fe was selected to develop the conceptual plans. “We talked to the architect firm and showed them
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what we were thinking and the views we were envisioning. They just took the next step,” Wilsey said. Along with the $2.5 million bond, the community and energy-based businesses have donated $650,000 for the expansion. The new wing will revolve around energy resources found in the San Juan Basin – such as oil, gas, and coal. Renewable energy such as wind, solar, and hydroelectric also will be a central focus.
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BASIN RESOURCES 13 “The oil, gas, and coal producers have already been represented. We will take it one step further and talk about the future of energyproduction and the research that has been done to make energy more environmentally friendly,” Wilsey said. He said he believes there is no other museum of which he is aware that is doing an energy exhibit like this. “This will be a one-stop shop for energy education.” For museum visitors who enjoy the geovator, a simulated elevator that shows people what it is like to drill an oil-well, the museum is adding a simulated trip into the coal mine. “It’s going to
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be very similar to the geovator,” said Cunningham. “There will be some motion so people can get the idea of coal mining.” Interactive, hands-on exhibits will also be available for the public to experience. “Not only will there be hands on technology, and very interactive, it will also be theatrical, so hold on to your hats,” Wilsey explained. Cunningham said once the architect firm has finished a definite plan and a construction contractor is selected through a bidding process, they hope to break ground and begin to build the wing extension by the end of this year. “There will be some real
cutting edge exhibits in there and we are looking forward to it,” Wilsey said. Once the existing exhibits are moved into the new wing, the current energy wing will provide more room for permanent artifacts relating to the early settlement of Farmington and its culture, said Cunningham. The current wing will also expand the American Indian rug collection, and give space to traveling exhibits and various art shows. “We are excited about getting this going and I think people will be blown away, because they will be looking at a world class exhibit,” Cunningham said.
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BP’s $4 million donation San Juan College School of Energy has bright future Lauren Duff For Basin Resources Everyone in the state understands how important the oil and gas industry is to New Mexico. What makes this industry continue to thrive is the expertise of the workforce that continues to grow through training programs. BP America Production Company, the third largest producer of natural gas in the state, announced a $4 million donation to the School of Energy at San Juan College. The announcement was made during a reception at San Juan College Henderson Fine Arts Center. This investment will go towards a new School of Energy building on the Farmington campus which will increase capacity and also enhance the curriculum and training courses offered by the program. “The demand for the energy program has grown substantially over the past five years. We have had to limit enrollment in some of our programs in the energy
program,” said Dr. Toni Pendergrass, San Juan College president. She added that this investment is an “extraordinary opportunity” for San Juan College to expand training for the energy workforce. Approximately 250 students from the School of Energy graduate every year with an associate degree. The school trains 7,000 individuals in industry curricula
every year for the workforce. “We simply cannot thank BP enough for their dedication and commitment to higher education, the state of New Mexico, and to this marvelous community.” Pendergrass said this opportunity goes beyond upgrading skills. “It is about helping students realize their dreams.” Randy Pacheco, School of Energy dean,
* donation
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San Juan College School of Energy offers new program this fall San Juan College’s School of Energy, or SOE, had a vision to create a workfriendly certificate/degree program. The result is a new program called Advanced Petroleum Production Operation, which the SOE will offer this fall. It’s the next level of training from what previ-
ously was offered in the invested with a company and Natural Gas Compression can’t afford to quit and go and Lease Operator proback to school,” explains grams. (The latter is Randy Pacheco, SJC now known as dean of the School Class Fundamentals of schedule on of Energy. “The Petroleum Producprogram is flexible Page 42 tion Operations.) but achievable for “This new certificate/deworkers who want to take gree is for the working emthe next step in their career.” ployee who already has time “Making time for that next
step pays off,” continues Lisa Martin, BP project director for the School of Energy. “Energy companies whose employees participate in School of Energy programs find their workforce expands their skill base, while preparing them for the next level.”
* college
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www.basinresourcesusa.com • Fall 2012
BASIN RESOURCES 17
donation said this investment will enable San Juan College and Farmington to be recognized as a global training leader. “We are hoping to develop that and get people from all over the United States and the world to come here and learn about how to produce hydro-carbon safely and efficiently with an environment-conscious mind,” he said. The School of Energy has one of the best technical training programs in the nation. New Mexico Governor Susana Martinez said the school is one of the top recruiting destinations for BP America. She added that over the last five years, it also has trained an estimated 10,000 individuals who work directly or indirectly with BP America. “The San Juan School of Energy is recognized as the best, but because of space limitations many eligible candidates are forced to sit on the waiting list. Today we hope to change that.”
She added that this investment will benefit San Juan County because it will allow students from all over the world to be trained in the industry and bring direct and indirect jobs into the county. “Not only has this investment in the community been realized in the form of good paying jobs, BP’s partnership with San Juan College and the School of Energy continues to train a highly skilled workforce,” Martinez said. Tim Harrington, BP North American Gas regional president, feels this investment is about transforming energy, and that starts with the individual training. “This is about legacy and how we can keep that legacy,” Harrington said. Along with BP America’s $4 million donation, the governing board of San Juan College will provide an additional $2 million for the project. San Juan College Foundation will also begin a
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capital campaign in an effort to raise $3 million and, once the money is raised, BP has agreed to match another $1 million, according to a San Juan College press release.
Martinez said it is now up to the community and the state to bring in the rest of the investment “so that we can allow more students to have options in this field.”
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18 BASIN RESOURCES
college The energy industry is changing, and employers are looking at ways to invest not only in their employees, but in their companies’ future. That means partnering with colleges, such as SJC’s School
of Energy, where potential employees have been well trained, or where current employees can receive professional development to become more promotable, knowledgeable and safer
workers. The new program offers some of the same classes that are in the SOE’s other two degree programs, but on a different
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20 BASIN RESOURCES
Sharpe: There’s a lot of wells to be drilled Debra Mayeux For Basin Resources Oil and gas is prevalent in the San Juan Basin and will be for many years to come. “We’ve got years and years and years of oil and gas,” said George Sharpe, investment manager for Merrion Oil and Gas. Sharpe recently negotiated a lease agreement with Bill Barrett Corporation of Denver, Colo., to come into the area construct horizontal wells and drill on Merrion-leased land in the Mancos Shale. Sharpe said there is 125,000 acres leased to Barrett and, with the proper spacing of one well for every 160 acres, there could be 156 wells. “There’s a lot of wells to be drilled,” he said. There is 3,400 square miles to the Mancos Shale, which includes San Juan, Rio Arriba and Sandoval counties. There are multiple oil and gas players on that land producing oil and gas. Those players
include Encana and ConocoPhillips. Merrion Oil and Gas estimates that 30 billion barrels of oil are in place with a potential for recovering 1.5 billion barrels from this one oil and gas rich area. While Merrion holds some of the land, Sharpe said it would be difficult for the relatively small independent energy company to make money on the proposition, if it was working alone. “We put most of the money back into the ground,” he said. Instead Merrion has “farmed-out” the land. “They pay us for
an opportunity to sublease.” The sublease includes an agreement to do land improvements, invest in capital to drill, and remove the oil and gas. “They’ve got to perform,” Sharpe explained. Barrett has a good track record in performing. “Barrett has the technical expertise to drill a horizontal well,” Sharpe said. Drilling a horizontal well is a difficult endeavor. It includes drilling down more than a mile and then setting pipe and creating a zipper-type lateral line that allows for fracking. Sharpe said some of the zipper
The Mancos Oil Play Size? Oil Fairway – 3,400 square miles (San Juan, Rio Arriba, Sandoval Counties) n
n Oil-in-Place n Recovery
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www.basinresourcesusa.com •Fall 2012
BASIN RESOURCES 21
Horizontal Wells... the Future is HERE! Shale Gas Horizontal Development
Their experts then tell them where it is best to drill. They drill and they use fracking technology, which is prevalent in most oil and gas production. Some 90 percent of all wells and 100 percent of shale wells drilled in the U.S.
are fracked. “Shut down fracking, and you can park the car and turn off the furnace,” the report said. Barrett will use this technology to access the oil and gas in the 200-foot deep Mancos Shale. The company will
First to Strike Oil? fracks have 50 stages. “Designing those fracks – supervising that – it takes a lot of equipment,” Sharpe said. Encana is doing 15- to 18stage fracks. The practice of fracking was developed more than 60 years ago. It is the process of using fresh water to break up the rock and release the oil and gas. Sharpe said it is safe, because there are thousands of feet of rock between the productive zone and the fresh water. “Fractures are limited to the shale zone, and do not penetrate through a mile of
rock into water sands,” according to a report produced by Merrion Oil and Gas on the reality of the energy industry in the basin. “If properly drilled, the fresh water sands near the surface are fully protected by two and sometimes three strings of pipe cemented in the hole,” the report stated. Sharpe explained that Barrett has drilled several horizontal wells in other basins and understands the practice of fracking in shales. “They are able to take the cores and analyze them,” Sharpe said.
Fall 2012 • www.basinresourcesusa.com
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22 BASIN RESOURCES analyze and drill, bringing production jobs to the industry and helping Merrion Oil and Gas develop the land on which it has held leases for a long time. “We could drill horizontal wells, but not for the money it would cost to drill a lot of them,” Sharpe said. It takes
about $5 million to drill one horizontal well. The cost does not match the rate of return, where they would need to get at least 150,000 barrels of oil at $33 per barrel out of one well to have a positive rate of return. The oil and gas is out there, according to Sharpe, and the
investors will come as the U.S. becomes less dependent on foreign oil and continues to drill at home. The Mancos
Shale will be a part of that reality, with Barrett already planning to drill two wells this fall.
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Road to Largo Canyon complication for Mancos Shale development Debra Mayeux For Basin Resources A 2,000-foot wide wash that is said to be 200 feet deep has been wreaking havoc on wagons, cars and oil and gas trucks and equipment for the past 50 or more years. It is the Largo Wash that has caused problems for people traveling south of U.S. 64 east attempting to get from Blanco into Largo Canyon to access homes, ranches and the numerous oil and gas sites in the region. The Largo Wash is part of the Mancos Shale, an area rich in oil and gas that essentially could turn around the economy in this region. There is one complication, however; it is getting in and out of the canyon without having to navigate the sometimes treacherous wash. “There’s only a couple of ways in,” said Dave Keck, public works director for San Juan County. Drivers can go through Blanco to County Road 4550 and cross over the Five Mile Bridge into Largo, or www.basinresourcesusa.com • Fall 2012
BASIN RESOURCES 25 drivers can go through the residential district along Sullivan Road. The Five Mile Bridge is a narrow one-lane bridge that once was used on a New Mexico Highway, but in the 1960s was moved to the intersection of County Road 4550 and U.S. 64 east of Blanco. In 1966, San Juan County and El Paso Natural Gas partnered to move the bridge again to the narrowest point in Largo Wash. “It’s up to 2,000 feet wide at some points. This area is only 300 feet wide,” Keck said. “I wish I would have been there to see them move that bridge.” Keck also is trying to find
out how the abutments were built, because they need to be “heavy duty” in that wash, where the water over the years has not only tried to erode around the bridge, but
Fall 2012 • www.basinresourcesusa.com
also is dangerous and, when it is running, swallows large machinery. Prior to the bridge being placed to assist traffic in crossing the wash, there were
legends about Largo Wash and its similarity to quicksand. “It’s notorious for swallowing heavy equipment – sunk in the wash and never retrieved,” Keck said.
Above: A Schlumberger truck became stuck in the Largo Wash in this photo from Feb. 1985. (Courtesy of the book Gas: Adventures into the history of one of the world’s largest gas fields – the San Juan Basin of New Mexico, by Tom Dugan.) Right: This August of 1954 photo shows a vehicle stuck and sinking in Largo Wash. It was provided by Virginia Copeland-Smith to Tom Dugan for his book. (Courtesy of the book Gas: Adventures into the history of one of the world’s largest gas fields – the San Juan Basin of New Mexico, by Tom Dugan.)
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28 BASIN RESOURCES Oil and gas man Tom Dugan dedicated 10 pages of stories and photos to the Largo Canyon legend in his book “Gas: Adventures into the History of one of the World’s Largest Gas Fields – the San Juan Basin of New Mexico.” Chapter 12 begins with the
subhead “Largo Canyon – Drivers Beware.” “The canyon is the longest and largest intermittent stream drainage in the San Juan Basin,” Dugan wrote. It is 65 miles long beginning just east of Blanco and traveling all the way to Cuba. The Wash was a
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main roadway in the 1920s for people traveling to San Juan County from Cuba, Albuquerque and Santa Fe. In the 1950s when oil and gas development became prevalent in the basin, Largo was traveled even more than in prior years. Keck characterized it as being “unreliable,” explaining, “If the surface gets hardpacked sand, you can cross it. If it’s not or if it was running with water and you tried to cross it, it would undermine the vehicle and it would start to sink,” he said. Dugan shares several stories of first-hand accounts of people who lost their cars, farming equipment and oil and
&% (!*! .
gas trucks in the canyon. “Many a vehicle has lost its footing and been filled with sand while trying to cross the infamous wash,” he said in a section about a Schlumberger Truck getting stuck in the wash late one night in 1985. The book also shows several photos of vehicles stuck in Largo Wash, which is why the bridge became such an interest to Keck who took over the county’s public works department in 1994. At that time the Five Mile Bridge was rated for 10 tons, but no one paid attention to the rating. “It was always a concern of mine that I had this bridge marked as 10 tons, but nobody was paying attention to it,” he
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BASIN RESOURCES 29 said. He decided to have the bridge analyzed, and that showed the 10-ton rating to be accurate. “But heavy vehicles were continuing to use it.” Keck knew the weight limit would be difficult to enforce, so the county put a weight bar on the bridge to enforce the weight limit. He continues to inspect the bridge once each month, and knows that with the predicted Mancos Shale boom, the county needs to plan for increased oilfield traffic in and out of Largo Canyon. In addition to increase traffic, there have been problems with a “meandering” wash, Keck said. That means the wash has begun cutting into and jumping the road. “The wash has been trying to go around the bridge.” He permitted a BLM rock pit and placed the rocks in front of the road, forcing the water back under the bridge, so the potential erosion problem is being managed, but still there is the access issue
for large heavy trucks. Keck looked at replacing the old Five Mile Bridge with a larger modern bridge that would span the entire wash. That has an estimated price tag of $15 million, for an estimated 250 to 300 vehicles traveling across the bridge each day. At a recent County Commission meeting, Keck brought up another possibility. “We started thinking out of the box,” Keck said. He is looking at the feasibility of welding steel plates onto to the bridge to strengthen it. “I’m not 100 percent sure it’s going to work,” he said. A team is investigating of the feasibility of the plan, and if they run into any questions or problems the investigation will stop. If the plan is feasible it could solve a lot of access issues in Largo Canyon. “I’m confident it could stop erosion around the bridge and open it up to 40-ton trucks,” Keck said. The estimated cost of refurbish-
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ing the bridge and welding on the steel reinforcement plates would be about $1 million. “The county is concerned about getting people into Largo Canyon,” said Keck, who points out it could be huge boon for the oil and gas industry if the Mancos Shale turns out to do as well as it is projected to do. “That oil would be brought out of the field by truck.” There also is the access to sites for repairs and maintenance. “The one thing we do not have control over is where people drive,” Keck said. “My county roads are not built like highways.” And heavy trucks damage county roads, but the benefit of oil and gas development outweighs the potential problems. “It’s just a fact of life around here, that we are going to be dealing with oil and gas traffic,” said Keck, who wants to work with area residents and industry to make the roads safe and usable while being well-traveled.
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30 BASIN RESOURCES
Mock rig disaster
WPX, Hurricane Swabbing hope for the best and plan for the worst Debra Mayeux For Basin Resources
WPX Energy and Hurricane Swabbing partnered in early September with local and state officials in New Mexico, Colorado and Texas to practice
www.basinresourcesusa.com â&#x20AC;˘ Fall 2012
emergency preparedness skills in the event of a rig disaster on a WPX site in Ignacio, Colo. The drill began shortly after 9 a.m. Sept. 12, when emergency crews in Ignacio were made aware of a drilling rig accident on La Plata County Road 319 at a WPX natural gas well site. Officials from the Southern Ute Police dispatched Los Pinos Fire Department to the site with one engine company, one water tender, one medic and rescue unit assigned. The La Plata County Sheriff’s Office, the Office of Emergency Management and the Colorado State Patrol, also were notified. Then, officials on site notified WPX Energy’s Aztec Office, which dispatched field technicians and supervisors to the scene for technical support. The site was described as an area that produces methane gas from the Mesa Verde/Dakota formation. The methane gas has an average pressure from the well at 122 psi. It enters a pipeline on site and the average pipeline pressure is 65 psi with daily average gas volume of gas of 285,000 cubic feet per day. Water also is produced on site from the gas stream and is collected and trucked off site for disposal.
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32 BASIN RESOURCES The simulated emergency was done to give WPX employees first-hand knowledge of how to react in an emergency situation. “The exercise gives everyone an opportunity to execute long-standing emergency response plans and agreements and to work together hand-in-hand to safely resolve emergencies,” said Bill Roberts, WPX Energy safety specialist. “The exercise is a cooperative effort with multiple agencies participating with a common goal: public safety and environmental protection.” Another plan purpose was to identify hazards and mitigate or reduce those hazards by overseeing employee reaction to the situation. There was a post-exercise evaluation with all participants in order to identify any opportunity for joint response improvement in the unlikely event of a
Williams, is headquartered in Tulsa, Okla. Its Aztec office employs 55 people who oversee more than 800 natural gas wells across 123,000 net acres. The company is involved in exploration and production of oil and gas reserves in the U.S.
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Another fuel option Coalition wants compressed natural gas facility here Debra Mayeux For Basin Resources Imagine fueling up your car or truck in your garage – or paying more than half the price of commercial gasoline. This could be the future of transportation in the United States, if the American Natural Gas Association has any input. Natural gas, currently powers less than 1 percent of the vehicles in this country. The nation is dead last behind Pakistan, Iran and Europe in the use of compressed natural gas as a transportation fuel. We have about 1,100 compressed natural gas stations and 180,000 gasoline stations, according to Sherrie Merrow, the natural gas vehicle advocacy lead for Encana and a member of the New Mexico Natural Gas Vehicle Coalition. This New Mexico group was formed in 2010 with various stakeholders, natural gas producers and government agencies coming to the
table to discuss the feasibility of compressed natural gas as the new fuel for personal vehicles, buses and trucks. Last summer the members looked at where to place new compressed natural gas stations in the state. The members met in
Farmington in June to further strategic planning and to get the “best buy-in” they could from local governments and energy producers. “We are very fortunate to have the coalition in our community. There is a strong interest in developing a compressed natural gas facility in our community,” said Jim Dumont, representative for Senator Jeff Bingaman. “The coalition has resources to develop the compressed natural gas infrastructure.” The infrastructure includes plants to compress the gas, storage facilities and public stations that can be accessed by the public to purchase fuel
for their vehicles. Farmington once had a natural gas pumping station. It is defunct, and Merrow addressed this by saying that there have two “game changers” in this industry. The first being the large quantities of natural gas, the second being the producers willingness to participate in the process. “We have so much natural gas we don’t know what to do with it,” Merrow said. “We as producers are in the game. We’re converting our own vehicles and we’re going to walk the walk.” The biggest problem the industry is facing is the lowcost of natural gas and how to store it, she explained. The benefits are numerous including the creation of 46,000 jobs in New Mexico billions of dollars coming into local communities. Other benefits include allowing the U.S. to become energy independent and it is environmentally friendly with lower emissions
* fuel 35
AlternAtive fuel CnG Services owner asks for natural gas vehicle credits Debra Mayeux For Basin Resources Dave Clement, the owner of CNG Services of Arizona, will be participating in several natural gas vehicle events in the region. He questioned why the federal tax credit on
natural gas vehicles has expired, while electric vehicles receive a $7,500 credit? CNG Services is the distributor for FuelMaker and Bauer products in both New Mexico and Arizona. Gas producers in the oil and gas-rich San
* CNG Services 37 www.basinresourcesusa.com • Fall 2012
fuel and low particulates. Merrow said U.S. car manufacturers are buying in and beginning to produce vehicles that run on both gasoline and compressed natural gas. There also are kits available to convert some pickups, school buses, transit buses, refuse trucks and heavy-duty trucks to compressed natural gas. Once these vehicles are converted, there has to be facilities to fill the tanks. The coalition will start with “green cities” that can offer fueling stations for their own fleets and possibly in-home gas pumps for those private citizens that want compressed natural gas cars.
“The ideal is to have a home fueling unit and that technology does exist,” Merrow said. “We build a market with people, who don’t need a station.” The next step is to map “green corridors” and begin developing compressed natural gas stations along those corridors. In New Mexico, stations would be located in Albuquerque, Santa Fe and Las Cruces, as well as Farmington. “Then, we really start to get an infrastructure going,” Merrow said. The plan would be to price it around $2 per gallon. The coalition wanted to start planning in New Mexico, because it is a state that understands the product. New
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Mexico creates 1/10 of the U.S. production of natural gas and the San Juan Basin is the largest natural gas preserve in the country. â&#x20AC;&#x153;This all about moving natural gas forward for vehicles in New Mexico â&#x20AC;&#x201C; building stations, getting vehicles converted,â&#x20AC;? Merrow said. The conversion costs around $12,000 for a pickup truck, while it costs approximately $36,000 to convert a bus and $29,000 to convert a refuse truck. Waste Management is making plans to convert its entire fleet to compressed natural gas. Some states offer incentives for conversions, such as Louisiana paying back $6,000
of the personal conversion cost. â&#x20AC;&#x153;They really believe in natural gas,â&#x20AC;? Merrow said. There are no federal incentives, but 13 governors have signed a memorandum of understanding to promote a switch to natural gas vehicles. Susana Martinez signed on for New Mexico. Merrow encouraged individuals and stakeholders to investigate the opportunities that exist in this field by analyzing fleets and fuel needs, identifying partners, seeking educational and training opportunities and joining in the move to develop this dream into a reality.
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37 BASIN RESOURCES
CNG Services Juan Basin know that there is enough natural gas in this area to fuel compressed natural gas, or CNG, vehicles for many years to come. “I don’t need tax credits for my business, but people who want to drive cleaner on American natural gas need help covering the additional upfront cost to get started, just the same as electric vehicles do,” Clement wrote to the TriCity Tribune. “If more people can get natural gas vehicles, my business providing fueling equipment will do just fine and will expand with the demand.”
• • • •
He was at the New Mexico State Fair on Sept. 21, which was alternative fuel day, presented by the Land of Enchantment Clean Cities Coalition. One month from now, on Oct. 20, Clement will celebrate National Alternative Fuel Vehicle Day with a display at Odyssey!, at the Pavilions in Scottsdale, as well as at the Oro Valley project graduation extreme car show for alternative fuel vehicles. “Renewing the tax extenders package, which should include natural gas vehicles, home and commercial fuel-
ing credits would help, but getting people into natural gas vehicles would be the biggest to help on the national and state level to drive cleaner and get off of for-
eign oil in a mass enough to make a difference,” Clement wrote. For more information about CNG Services visit www.cngaz.com.
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38 BASIN RESOURCES
New Mexico Oil & Gas Association
2011 vs 2010 Gross GAS Production in New Mexico by Operator (Production in MCFs of natural gas)
1 ConocoPhillips 2 Oxy USA 3 Energen Resources Corp. 4 BP America 5 Devon Energy Corp., LP 6 COG Operating LLC 7 WPX Energy Production, LLC 8 Chevron USA, Inc. 9 Apache Corp. 10 Yates Petroleum Co. 11 El Paso E & P 12 Cimarex Energy 13 Hess Corp. 14 Mewbourne Oil Co. 15 Enervest Operating, LLC 16 BOPCO, LP 17 ExxonMobil (incl XTO Energy) 18 EOG Resources, Inc. 19 Chesapeake Operating, Inc. 20 Dugan Production Corp. 21 Four Star Oil & Gas Co. 22 Blackhills Gas Reources, Inc. 23 Range Operating NM LLC 24 Noble Energy, Inc.
2011 Production
Increase 2010 Rank
455,204,989 130,702,614 69,334,360 67,293,935 62,266,698 60,139,217 50,041,253 47,836,713 35,146,632 31,195,574 26,528,332 20,472,078 18,558,201 16,488,657 15,726,198 13,526,841 12,183,451 11,301,058 8,953,635 8,840,345 7,647,001 6,420,079 5,777,050 5,654,622
1 10 4 3 5 8 6 7 11 9 12 13 xxx 14 15 18 2 16 17 19 21 22 20 23
2010 Production
(Decrease)
471,643,236 33,790,435 68,903,167 70,957,250 67,915,812 51,915,617 53,641,164 52,426,243 28,943,392 35,999,806 26,195,178 20,244,991
(16,438,247) 96,912,179 431,193 (3,663,315) (5,649,114) 8,223,600 (3,599,911) (4,589,530) 6,203,240 (4,804,232) 333,154 227,087 18,558,201 (3,030,011) (281,939) (892,847) (59,030,077) (4,001,484) (1,808,704) (171,791) 627,465 (124,421) (1,428,468) (421,931)
19,518,668 16,008,137 14,419,688 71,213,528 15,302,542 10,762,339 9,012,136 7,019,536 6,544,500 7,205,518 6,076,553
www.basinresourcesusa.com â&#x20AC;˘Fall 2012
BASIN RESOURCES 39 25 Lime Rock Resources, LP 26 John H. Hendrix Corp. 27 Three Rivers Operating Co. LLC 28 McElvain Energy, Inc. 29 Legacy Reserves Operating, LP 30 Elm Ridge Exploration Co., LLC 31 Nadel & Gussman HEYCO, LLC 32 Endeavor Energy Resources 33 Coleman Oil & Gas, Inc. 34 Merrion Oil & Gas Corp. 35 Burnett Oil Co 36 Mack Energy 37 Parallel Petroleum Corp., LLC 38 Huntington Energy, LLC 39 Murchison Oil & Gas, Inc. 40 Fasken Oil & Ranch, Ltd. 41 Robert L. Bayless Producer, LLC 42 Nearburg Producing Co. 43 Armstrong Energy Corp. 44 Stephens & Johnson Operating 45 Merit Energy Co, LLC 46 Kaiser-Francis Oil Co. 47 Chi Operating, Inc. 48 M & G Drlg Co. 49 Read & Stevens, Inc. 50 SG Interests LTD
5,635,767 4,544,637 4,483,693 4,405,843 4,375,841 3,983,526 3,834,791 3,312,805 3,493,691 3,362,542 3,060,623 2,899,946 2,812,711 2,789,393 2,719,121 2,667,667 2,519,526 1,946,023 1,929,722 1,861,022 1,859,990 1,783,887 1,731,832 1,716,720 1,680,176 1,626,267
5/22/12
1,264,277,295
24 27 xxx 28 xxx 29 26 30 31 33 39 35 32 xxx 36 34 37 42 47 44 41 xxx 43 45 40 xxx
5,464,824 4,534,093
170,943 10,544 4,483,693 147,511 4,375,841 (26,370) (774,611) (593,107) (331,290) (273,072) 544,009 (69,378) (937,661) 2,789,393 (56,441) (778,794) (248,421) (129,792) 339,563 (24,045) (246,421) 1,783,887 (312,277) (35,587) (438,199) 1,626,267
4,258,332 4,009,896 4,609,402 3,905,912 3,824,981 3,635,614 2,516,614 2,969,324 3,750,372 2,775,562 3,446,461 2,767,947 2,075,815 1,590,159 1,885,067 2,106,411 2,044,109 1,752,307 2,118,375 1,231,701,013
32,576,282
xxx = not among top 50 operators in 2010 2010 Operators not in 2011 Top 50:Samson Resources, Rubicon Oil & Gas, BTA Oil Producers, LLC, West Largo Premier Oil & Gas, RKI E & P, LLC Statistical information furnished by NMOCD, Compiled for NMOGA by Marie Gutiérrez
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Debra Mayeux For Basin Resources Farmington Oilman Tom Dugan recently received honors from the Independent Petroleum Association of New Mexico, when the organization gave him a lifetime achievement award. Dugan has been involved with the association since it began as a way for independent producers to have their voices heard. “They’re more or less a lobbying group for the independent and smaller companies,”
Dugan said. There are two organizations that lobby the local, state and federal government for oil and gas. They are the Independent Petroleum
* Dugan
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Dugan Association and the New Mexico Oil and Gas Association, or NMOGA. The latter was formed by major oil producers in the region. “The Independent Petroleum Association was started by independents, because we didn’t think we were getting our fair share in Santa Fe,” Dugan said. Many years ago, NMOGA was not as quick to welcome independents. Today the two organizations work together. Dugan, who is considered a pioneer in production for the Four Corners, served on the Independent Petroleum Association board for a number of years, and was the president in 1986.
“That’s when things all went to hell,” Dugan said. “The economy was bad. The price of oil dropped from $30 a barrel to $10 a barrel overnight.” The IPANM had an office in Santa Fe with three employees – all had to be let go. “I had to fire them,” Dugan recalled. He hopes there’s a brighter future for the industry with the development of the Mancos Shale. Dugan said he is working with Encana, a company that has drilled nine horizontal wells on the Mancos. When asked why he was recognized by the IPANM, Dugan said, “I guess it’s because I’ve got so old, and I’m still work at 86.” He will celebrate his 87th birthday in November.
Fall 2012 • www.basinresourcesusa.com
42 BASIN RESOURCES
college schedule. A one-half credit class is offered every Thursday. Those classes, along with required electives, give students flexibility to achieve their certificate or degree in their own time frame. “These programs are really catching the eye of the energy industry,” Martin says. For more information about how to apply and register for the new program, call the San Juan College School of Energy at 505.327.5705.
2012
Oil and Gas Industry Training Course(s)
October 4 October 5 October 11 October 18 October 19 October 25 November 1 November 2 November 8 November 15 November 16 November 22 November 29 December 6 December 7 December 13 December 20 December 27
ENER 120 Introduction to Dehydration LSOP 230 Theory of Line Locating ENER 1211ntroduction to Automation ENER 122 Introduction to Compression LSOP 230 Theory of Line Locating ENER 214 Why We Use Compression (ENER 122 pre) ENER 130 Introduction to Oil & Gas LSOP 230 Theory of Line Locating ENER 217 Introduction to Cathodic Protection ENER 131Basic Electrical Theory LSOP 230 Theory of Line Locating NO CLASS ENER 140 Laptop Usage for Technical Careers ENER 1411ntroduction to Disposal Well Operations LSOP 230 Theory of Line Locating ENER 135 Emissions Detection, Analysis, and Control NO CLASS NO CLASS
Location/Time SOE/8:00-3:00 SOE/8:00-4:00 SOE/8:00-3:00 SOE/8:00-3:00 SOE/8:00-4:00 SOE/8:00-3:00 SOE/8:00-3:00 SOE/8:00-4:00 SOE/8:00-3:00 SOE/8:00-3:00 SOE/8:00-4:00 CWT/8:00-3:00 SOE/8:00-3:00 SOE/8:00-4:00 SOE/8:00-3:00
The graphic displays a listing of remaining Fall classes that are part of the new Advanced Petroleum Production Operation Program offered through the San Juan College School of Energy. To earn the certificate or associate’s degree, students will also be required to take additional general education and industry classes. For more information, contact the School of Energy at 327-5705.
www.basinresourcesusa.com • Fall 2012
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1st place 1,000 winner Made in the Shade
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2nd place $ 500 winner Inspecting the New Compressor
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This photo was taken by Bill Royce of Walsh Engineering at Hart Canyon, northeast of Aztec.
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www.basinresourcesusa.com â&#x20AC;˘Fall 2012
BASIN RESOURCES 45
Rage and ruin in the reign of the EPA The riots, rage, and ruin that have spread throughout the Middle East over the past couple of weeks emphasize the urgency of opening up and bringing online America’s vast resources — yet, as Congressman Pete Olson (R-TX) states: “The EPA is the biggest obstacle to energy independence.” Olson’s comment specifically addressed the Hydraulic Fracturing Study requested by Congress as a part of the FY 2010 appropriations bill, which states: “The conferees urge the agency to carry out a study on the relationship between hydraulic fracturing and drinking water, using a credible approach that relies on the best available science, as well as independent sources of information. The conferees expect the study to be conducted through a transparent, peer-reviewed process that will ensure the validity and accuracy of the data. The Agency shall consult with other Federal agencies as well as appropriate State and interstate regulatory agencies in carrying out the study, which should be prepared in accordance with the Agency's quality assurance principles.” A study “on the relationship between hydraulic fracturing and drinking water” sounds like a great idea. No one wants their drinking water filled with toxic elements, and, if the EPA followed the mandate, a work of global importance could result. American private enter-
prise and initiative has lead the world in developing and implementing horizontal drilling and hydraulic fracturing techniques that are safe and are uniquely responsible for totally transforming the energy landscape — making previously unrecoverable resources, recoverable. Therefore, the final study from the EPA has worldwide implications for oil and natural gas supplies. It must be done right. Instead of moving forward with a “Hydraulic Fracturing Study” as requested by Congress, the EPA has done what is characteristic of this administration; they’ve blown it out of proportion—making it something bigger, requiring additional personnel, and creating more management, at greater expense. Final results are not due until 2014—four years after Congress requested a simple study. Lisa Jackson’s EPA has expanded the study’s scope to encompass numerous peripheral elements related to oil and gas exploration and production activities; a full lifecycle analysis of everything remotely associated with unconventional recovery. Congress requested a report based on “best available science,” not opinion, yet the EPA has included items such as “environmental justice”—which has nothing to do with science, and “discharges to publicly owned water treatment plants”—which are no longer a part of the hydraulic fracturing process.
MARitA k. noon ExEcutivE DiREctoR EnERgy MAkEs AMERicA gREAt inc. Fall 2012 • www.basinresourcesusa.com
The additional elements exponentially exacerbate the study’s potential complications. Meanwhile, America could be undergoing a robust development of our resources. Instead, as Congressman Mike Conaway (R-TX) explained, “Industry is holding back because it is not sure what the regulatory future holds.” He called the study’s evolution beyond the scope of what was requested: “mission creep.” Until a definitive answer on “the relationship between hydraulic fracturing and drinking water” is produced, a constant cloud of legal threat hangs over possible development, and potential jobs, such as in New York’s Marcellus Shale, are deferred. These concerns, plus many others, prompted industry to independently engage, at their own expense, Battelle Memorial Institute to conduct a collaborative, side-by-side study with the EPA. Congressman Andy Harris (R-MD), Chairman of the House Science, Space, and Technology Committee Subcommittee on Energy and Environment, says
that Battelle is “a highly respected independent science and technology organization.” (It is important to note that Battelle’s business is heavily dependent on government contracts, so accepting the responsibility of doing a collaborative study held risks for the company—coming out with a different result from that of the EPA could mean the loss of future contracts. Additionally, they do a lot of work with the EPA, so their opinions should be trusted by the EPA.) Despite the EPA’s rejection of industry’s offer, Battelle moved forward with a scientific review of the EPA’s study plan to ensure that the EPA is taking a rigorous and adequate approach, as quality cannot be built into the back end of a science-based project. Battelle’s report is complete. On Thursday, Battelle’s team provided a briefing on Capitol Hill that was attended by more than 30 Representatives and/or staffers from the Natural Gas and Marcellus Shale Caucuses. Numerous concerns were presented. The EPA’s study plan reflects a deadly combination
46 BASIN RESOURCES of arrogance and incompetence. Arrogance Hydraulic Fracturing is a highly technical process that has evolved since its initial use more than 60 years ago — continuously undergoing improvements. Hundreds of thousands of wells have been drilled. The expertise and experience lies within the industry, yet the EPA has specially rejected industry’s attempts to collaborate — despite the fact that the original mandate requires: “a transparent, peer-reviewed process that will ensure the validity and accuracy of the data.” In a letter to the EPA, Marty Durbin, Executive Vice President, American Petroleum Institute (API), says: “We have repeatedly offered the expertise of our members to both the agency and the Scientific Advisory Board (SAB) peer review process and, unfortunately, have been disappointed by the lack of follow through and acceptance.” Battelle’s report states: “Industry collaboration is not envisioned.” Additionally, the requirements, published in the Federal Register calling for nominations, for the SAB, are set so they specifically exclude experts from industry. “Selection criteria” includes “absence of financial conflicts of interest.” The call for SAB nominations continues: “government officials” will “determine whether there is a statutory conflict between a person’s public responsibilities and private interests and activities, or the appearance of a lack of impartiality.” Presumably those from academia and NGO’s would be acceptable. However, as the API letter points out, the “EPA should recognize most individuals nominating themselves for potential SAB membership have some financial stake in the business — academics seek
grants, NGOs seek donations, regulators seek programmatic funding, consultants seek contracts from government, as well as industry.” Industry representatives with direct history of working in the modern oil and gas industry have a long record of valuable, unbiased participation in many other SAB committees and panels, yet for this watershed study, they have been excluded. Additionally, the Congressional study request calls for consultation “with other Federal agencies as well as appropriate State and interstate regulatory agencies.” To date, there is no evidence of working with Pennsylvania, Texas, Colorado — or any other state with extensive hydraulic fracturing experience. Numerous studies have been done, but the EPA doesn’t appear to be incorporating their discoveries. For example, in August 2011, the Groundwater Protection Council published its own study of “state determinations regarding causes of groundwater contamination resulting from oil and gas industry E&P activities,” examining nearly 400 contamination incidents over 25 years in Ohio and Texas, and concluding that “[n]either state has documented a single occurrence of groundwater pollution during site preparation or well stimulation.” Obviously, the arrogance of the EPA believes they know best and they don’t want input from anyone who might disagree with their preconceived bias. Incompetence According to Battelle’s report, the EPA has a rigorous Data Quality Assessment process established for internal studies, but is not using it when setting up this study—which can impact the data quality and
scientific rigor. If strict stanrequired for scientifically rigordards are not met, the entire re- ous treatment of all the report can be brought into search questions asked.” question, as was the case with Focusing primarily on sites the Pavillion, Wyoming, study with known issues also ignores released a year ago. The results the current state of the technolmust be defensible to achieve ogy. Chemicals used now are the study’s goals. very different from what was The sites selected for study used five years ago. Analysis show a bias with the potential from these sites will be virtuto skew the data and therefore ally useless in making a meanthe study. Instead of using a ingful recommendation representative sampling of well regarding current or future hysites from the hundreds of draulic fracturing activities. thousands of wells that have Battelle’s report points out that been drilled, the EPA has cho“the site data collected from sen to focus on only seven sites the companies are from 2006— a statistically insignificant 2010, and the final report will number. Of the seven, five be in 2014. The changes occurhave known contamination ring at these sites in the interproblems, but no baseline data. vening years will likely render Therefore, there is no way to the data obsolete for purposes tell whether the complaints are of the study.” in any way related to hydraulic All of this may seem of little fracturing or to any specific relevance to the person strugthing. There are known examgling to fill up their tank at ples of naturally occurring today’s high gas prices. Howdrinking water contamination ever, it is of utmost impor— as was found with the tance. All sides benefit from a widely publicized Dimock, study that can withstand Pennsylvania, case. The five scrutiny. If there are foundaretrospective sites are the subtional problems and the overall ject of complaints by individu- study results prove hydraulic als who may now be fracturing is safe and doesn’t stakeholders in potentially lucontaminate drinking water, as crative litigation against opera- the industry believes they will, tors. The concern is that the “it the environmentalists, who ophas problems, so let’s study it pose hydraulic fracturing, will to see if it has problems” apappeal it. If the reverse is proach will limit the scientific proven, industry will seek an validity and usefulness of case appeal. In either case, appeals study findings. At Thursday’s will delay the much-needed robriefing, the limited sampling bust development of American was likened to using five traffic resources — not to mention the accidents in some parts of waste of time and taxpayer dolAmerica to draw conclusions lars spent on the study. about how to construct and If the events that have regulate traffic and road safety erupted in the Middle East in all of the country to avoid show us anything, it is the U.S. future accidents. dependence on Middle Eastern Instead, the study should oil must come to an expedifocus more heavily on prospec- tious end. With America’s new tive sites where baseline data is found oil and gas reserves, regathered before drilling and be- covered through hydraulic fore the use of hydraulic fracfracturing, we now know that turing. The Battelle report energy independence is possistates: “Two prospective sites ble, if, as Congressman Olson cannot deliver the range of data told me, “We rein in the EPA.” www.basinresourcesusa.com •Fall 2012
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50 BasiN resoUrces
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