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More Financial Worries Coming to Light in Domestic Shale Drilling Industry

Virtually anyone who has followed the onshore drilling bonanza knows the name Aubrey McClendon and the company he co-founded, Chesapeake Energy.

McClendon was the hard-driving CEO and chairman of one of America’s most aggressive drilling companies, but he was brought down earlier this year after a string of financial scandals and potential conflicts of interest came to light. It turned out that at the heart of the natural gas industry’s poster child lay financial practices that drew the ire of investors, the attention of SEC investigators and the fixation of the news media.

But in the past several months there have been a series of largely under-reported events that demonstrate that Mr. McClendon's problems are by no means distinct.

Might the drilling industry have broader financial issues?

Obama's Energy Strategy -- Too Little, Too Late?

A year ago, President Obama set forth his vision of America’s energy policy. “We need an energy strategy for the future,” he said in a message still prominently displayed on the White House website, “an all-of-the-above strategy for the 21st century that develops every source of American-made energy.”

During the presidential debates, he hammered repeatedly an “all of the above” theme, though he also surprised many by making a strong statement about the urgency of confronting climate change during his second term.

This week, President Obama once more talked about his “all the above” strategy as he announced that he was setting aside $2 billion for research and development on alternative transportation fuels.

Things are looking up for renewable energy, right? Not so fast.

Obama's choice for new directors of the three agencies with the most relevance to climate change – the Environmental Protection Agency, the Department of Energy and the Department of the Interior — do not sew confidence that real change is coming.

Pennsylvania Failing to Sanction Drillers for Fracked Well Failures

For the past several years, the shale gas industry has argued that oversight of fracking is getting tighter and that the amount of methane gas leaking from their wells is less than some have speculated.

In Pennsylvania, however, the opposite is true, according to a white paper delivered to New York state regulators by Cornell engineering professor, Anthony Ingraffea. Inspection data from the state indicate that over 150 Marcellus shale wells in Pennsylvania had severe flaws that have led to sometimes large leaks and yet the operators of those wells were never issued violations by regulators for these breaches of state law.
 
By failing to cite drillers when things go wrong, Pennsylvania environmental regulators have for the past three years obscured the rate at which Marcellus wells leak, creating a falsely optimistic picture. Leaks at dozens of wells were described by state inspectors in their report notes, but violations were never issued.

Shale Industry Moves to Ship Fracking Waste via Barge, Threatening Drinking Water Supplies

A large barge passes Pittsburgh. Image from Shutterstock.

It was meant to go unnoticed. A small announcement out of a commissioners’ meeting signaled plans to transport fracking wastewater by barge down the Ohio River. But it caught the eye of locals and offers a further reminder of why handling and disposal of the wastewater is truly one of the shale drilling industry’s most important and overlooked concerns.
 
Construction is already completed at one barging facility in the Marcellus region. A Texas-based company, GreenHunter Water, has built a shipping terminal and 70,000-barrel wastewater storage facility on the Ohio River in New Matamoras, Ohio. GreenHunter officials have said they are currently accepting about 3,000 barrels of fracking wastewater per day.

The U.S. Coast Guard is now reviewing plans to barge fracking wastewater in the region’s rivers, which serve as the drinking water supplies for over half a million people.  
 
These plans have raised alarm for many reasons. In the event of a barge accident, the drinking water for major cities like Pittsburgh could be immediately contaminated; the barges themselves could become radioactive because Marcellus shale wastewater carries unusually high levels of radium; spills or illegal dumping could be harder to detect in water than on land.

Shale Gas Uncertainty: How an Industry Talking Point Misses the Mark

When oil and gas executives gathered in Pittsburgh, Pennsylvania to discuss the state of the industry shortly after Obama won re-election, they raised a recurring complaint.

“We now face four more years of regulatory uncertainty,” said Randy Alpert, an official with Consol energy told gathered shale gas executives.

Penny Seipel, Vice President of the Ohio Oil and Gas Association hit a similar note the very next day.

“Unfortunately, we have had quite a bit of uncertainty regarding our fiscal situation,” she said as she described proposed regulation and taxation of drilling companies in her state.

This uncertainty mantra has been trotted out by many industries facing potential oversight and is now being picked up by oil and gas: “We are not against regulation, we are against regulatory uncertainty,” the line goes. “We don’t care what the rules are,” companies say, “just tell us ahead of time and then we will follow them gladly.”

This well-worn trope gives the impression that drillers do not view regulators as adversaries. All they’re asking for is common-sense fairness. Who could be against someone asking to know what the rules are? Predictability is a reasonable request.

It's a shrewd position for the shale industry. But it’s also deeply misleading and worth flagging now since it is likely to get amplified in coming months as more attention turns to whether federal officials should step up their oversight of oil and gas drilling.

Oil and Gas Industry Set to Attack Matt Damon's "Promised Land"

Next month Focus Features releases Matt Damon’s new movie and the oil and gas industry is worried sick about it.

The movie, Promised Land, is about a Pennsylvania farm town deciding whether to go forward with shale gas drilling after a team of landmen arrives in the area.

Damon plays one of these landman, who rolls into town presenting himself as a humble flannel-wearing farmboy from Iowa. Damon’s character is an ace salesman, famously good at convincing homeowners to sign away the rights to their land. But halfway through the story, he starts having ethical pangs about his profession. Damon’s internal conflicts grow deeper as he grows closer to locals.

By Hollywood standards, it’s a small film, with a budget of $15 million. The script was written by Damon and co-star John Krasinski (best known for his role as Jim in “The Office”) and is based on a story by Dave Eggers.

The drilling industry is none too pleased about the movie’s at-times unflattering portrayal of landmen and it has already geared up its attack machine to aggressively respond.

The irony here, of course, is that the industry’s plan for taking on the movie runs parallel at times to the movie itself.  It a case where art imitates life imitates art.

I will come back to this.  But first, meet Mike Knapp.

Pennsylvania's Top Environmental Regulator Champions Drilling Industry at Shale Conference

When Pennsylvania Department of Environmental Protection Secretary Michael Krancer stepped to the mic at a shale oil and gas conference earlier this month, he offered one of his most candid descriptions to date of how he sees his mission as a regulator. His job, he said, is to protect the state not from the potential misdeeds of drillers but from those of the EPA.

EPA has completely lost its concept of the rule of law,” Mr. Krancer charged, adding that he would remain watchful against any effort by the federal government to usurp state authority over hydraulic fracturing.

It was a small window into the mind of the top environmental regulator in a state now famous as ground zero of the current drilling boom, where the shale industry has enjoyed a virtually unprecedented bonanza.

Mr. Krancer described how foolhardy he thought it was to assume that the industry needed policing.

We’ve been doing this safely in the United States for years and years and years,” he said with regards to hydraulic fracturing (fracking).

Along these lines, he dared his listeners to walk up to any American rigworker and to look that worker in the eye and tell say to his or her face that they shouldn’t be trusted to do their job safely.

Actually, I don’t recommend that you do take that challenge,” he added, to knowing chuckles from the audience of shale gas industry representatives.

So Wrong, So Often: Karl Rove Grasps For Audience Approval at Oil & Gas Summit

When the shale gas industry met last week in Pittsburgh, none other than Karl Rove gave the keynote speech, regaling the audience with a lengthy patriotic anecdote comparing the fossil fuel dillers to the US Navy Seals who killed Osama Bin Laden.

Having recently attended a quail hunt fundraiser with some of those Navy Seals, Rove described the tenacity of one Seal who had been wounded sixteen times on a mission in Iraq but courageously improvised his own medical evacuation despite his severe injuries. Rove then told the assembled drillers that their industry was serving the nation and overcoming adversity in much the same way as that soldier.

You overcome the physical difficulties of drilling thousands of feet under the surface for hydrocarbons,” he told over a thousand oil and gas executives as they dined on artichoke-crusted chicken. Invoking the wounded American soldier, Rove added: “He’s overcoming it by finding a way, after serving in this ghastly way like that, to serve something bigger than himself.”

It was quintessential Karl Rove. It was also the crowning moment of a rousing speech from a man who, over the past month has been pilloried for being so wrong, so often.

In Hurricane Sandy's Aftermath, Fracking Adds to Headaches

As Hurricane Sandy battered the East Coast last month, tens of thousands of landowners with oil and gas leases faced an especially acute concern: would they get help from FEMA if their properties were damaged or destroyed by the storm?

The question arises across the Marcellus region –- and the rest of the U.S. – because one of the agency's disaster response programs will not buyout land that’s been leased to drillers, according to FEMA emails and internal documents.

The US shale boom is drawing increasing attention from federal agencies worried about the potential hazards posed by drilling. A growing awareness of financial risks to landowners and lending institutions associated with oil and gas drilling is slowly emerging. The USDA, Fannie Mae and Freddie Mac have already considered moves to protect themselves from potential legal and financial reverberations.

With FEMA Hazard Mitigation Grant Program funding now at stake, Congress is also getting involved.

Oil and Gas Leases Create Conflicts for FEMA

As the shale gas boom has brought oil and gas drilling closer and closer to home for many Americans, banking and real estate experts have found that drilling may pose significant risks involving property values, homeowners, and mortgage lenders.

New documents obtained by DeSmogBlog show that the Federal Emergency Management Agency (FEMA) is the latest in a string of federal agencies and other major institutions that are now contending with the drilling boom’s impacts. And some landowners in Pennsylvania are now finding out that oil and gas development in their communities can cause unexpected difficulties – leading to new headaches for families who are already dealing with catastrophe.

Since the 1980’s, FEMA’s Hazard Mitigation Grant Program has worked to minimize the harms caused by disasters like floods. The program also provides help to those in areas that see frequent earthquakes or wildfires, taking measures to cut down on the harm done to people and to property.

Americans often turn to this program when their homes have been flooded again and again. It is a program of last resort, helping to pull back development from areas that are prone to disasters.

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