1 The Path and Safety Challenge Associated With the Marcellus Shale in Pennsylvania Stephanie Catarino Wissman Executive Director Pennsylvania Governors.

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The Path and Safety

Challenge AssociatedWith the Marcellus

Shale in Pennsylvania

Stephanie Catarino WissmanExecutive Director

Pennsylvania Governor’s Occupational Safety &

Health Conference

February 19, 2013

300 North Second Street | Suite 902 | Harrisburg, PA 17101 | www.api.org 2

Associated Petroleum Industries of PennsylvaniaA Division of the American Petroleum Institute

The American Petroleum Institute (API) is the only national trade association that represents all aspects of America’s oil and natural gas industry. Our more than 500 corporate members, from the largest major oil company to the smallest of independents, come from all segments of the industry. They are producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies that support all segments of the industry.

Although our focus is primarily domestic, in recent years our work has expanded to include a growing international dimension, and today API is recognized around the world for its broad range of programs.

Who We Are

300 North Second Street | Suite 902 | Harrisburg, PA 17101 | www.api.org

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What We Do

Advocacy

•We speak for the oil and natural gas industry to the public, Congress and the Executive Branch, state governments and the media.

•We negotiate with regulatory agencies, represent the industry in legal proceedings, participate in coalitions and work in partnership with other associations to achieve our members’ public policy goals.



What We Do

Standards

•For more than 85 years, API has led the development of petroleum and petrochemical equipment and operating standards. These represent the industry’s collective wisdom on everything from drill bits to environmental protection and embrace proven, sound, engineering and operating practices and safe, interchangeable equipment and materials.

•API maintains more than 600 standards and recommended practices. Many have been incorporated into state and federal regulations; and increasingly, they’re also being adopted by the International Organization for Standardization.



What We Do

Research and Statistics

•API conducts or sponsors research ranging from economic analyses to toxicological testing. We collect, maintain and publish statistics and data on all aspects of U.S. industry operations, including supply and demand for various products, imports and exports, drilling activities and costs, and well completions. This data provides timely indicators of industry trends.

•API’s Weekly Statistical Bulletin is the most recognized publication, widely reported by the media.

300 North Second Street | Suite 902 | Harrisburg, PA 17101 | www.api.org6


What We DoCertification

•Each day, the oil and natural gas industry depends on equipment to produce, refine and distribute its products. The equipment used is some of the most technologically advanced available in the search for oil and gas and allows the industry to operate in an environmentally safe manner.

•Designed for manufacturers of production, drilling, and refinery equipment, the API Monogram Program verifies that manufacturers are operating in compliance with industry standards.

•API also provides quality, environmental, and occupational health and safety management systems certification through APIQR.

300 North Second Street | Suite 902 | Harrisburg, PA 17101 | www.api.org7


What We DoEducation

API organizes seminars, workshops, conferences, and symposia on public policy issues. Through API University, we provide training materials to help people in the oil and natural gas business meet regulatory requirements and industry standards. To prepare the next generation of Americans to make informed decisions or pursue careers in our industry, we work with the National Science Teachers Association and other educational groups to impart scientific literacy and develop critical thinking skills in the classroom. Resources developed specifically for teachers and students include Energy & Society, and www.classroom-energy.org, informative and interactive educational resources in one easy-to-use location.

http://www.classroom-energy.org/


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500 corporate members include large corporations, smaller independents, service and supply companies throughout the US and the world

Largest, oldest, and most diverse association of oil and gas businesses with over 900 members in PA


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The Keystone Energy Forum was formed through a partnership

of two major oil and gas trade associations in Pennsylvania.

The American Petroleum Institute and the Pennsylvania

Independent Oil & Gas Association represent over 95% of

operators in the Commonwealth.

REACH OUT, INFORM, EDUCATE


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A New - Yet Old- PA Industry

1859: Drake Oil Well

1878: Haymaker Well in Murrysville. First commercial natural gas well in U.S.

150 YEARS of drilling history, 60 years of hydro fracturing.

350,000 vertical wells

60,000 still in production


Shale Formations in Pennsylvania


Marcellus Shale Formation

• Geological formation created about 380 million years ago in Middle Devonian age

• As formation aged and decayed, natural gas trapped in the shale

• Formation rests a mile or more below surface, thickness between 50-200 feet

• Approximately size of 95,000 square miles


Marcellus Shale Formation

Estimated recoverable reserves: 500 trillion cubic feet (tcf)– Current U.S. natural gas

demand is 23 tcf per year

– Marcellus has potential to serve

not only Pennsylvania, but can meet 25 percent of total U.S. natural gas demand

– Natural gas prices would increase without current Marcellus Shale production

Economically feasible as a result of:– Horizontal drilling– Proximity to northeastern

population centers


The Competition

U.S. Department of Energy, U.S. Shale Basins


…to the largest oil and gas fields in the world

How the Marcellus compares…

Marcellus reserves could exceed those of the largest oil field in the world (Saudia Arabia) and be the 2nd largest natural gas field (largest in Qatar/Iran)

(Bubble size approximates reserves)


Utica Shale Formation

The Utica Shale formation lies a few thousand feet below the Marcellus shale and covers most of Pennsylvania. The Utica Shale is thicker than the Marcellus, it is more geographically extensive, and it has already proven its ability to support commercial production.

The potential source rock portion of the Utica Shale is extensive. In the United States it underlies portions of Kentucky, Maryland, New York, Ohio, Pennsylvania, Tennessee, West Virginia and Virginia.

If the Utica Shale is commercial throughout this extent it will be geographically larger than any natural gas field known today.


Utica Shale Formation

The United States Geological Survey (USGS) recently released its first estimates of undiscovered, recoverable natural gas and natural gas liquids, like ethane and propane, in the Utica Shale formation. The USGS estimate covered parts of Maryland, New York, Ohio, Pennsylvania, Virginia, and West Virginia.

Natural Gas – 38 trillion cubic feet

Oil – 940 million barrels

Natural Gas Liquids – 208 million barrels

The Utica Shale formation is in its earliest stages of development in northwestern Pennsylvania with exploratory wells being drilled in Crawford County. The pace is a little higher in Ohio, where 19 rigs are currently operating.


Marcellus Shale Development


Phases in Marcellus Shale Development

1. Pre-Drilling– Exploration – Leasing

2. Drilling– Construction– Horizontal Drilling– Casing and Groundwater

Protection

3. Completion – Hydraulic Fracturing/Well

Stimulation– Flow-Back

4. Production– Post-Production– Site Reclamation


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• Extensive review of geologic conditions completed prior to drilling

• Wealth of state and federal geological data available

• Two- and three-dimensional seismic testing completed to better identify formation details

Exploration



Two and Three-dimensional seismic• Seismic trucks send shock waves into

the ground - waves bounce off the rock and reflect back to the surface

• Geophones record vibrations• Computer processes vibrations and

develops geologic picture• Small charges placed 15-20 ft below

surface in grid pattern, fired in succession

• Geophones record vibrations from charges

• Computer displays images of rock below

• Improves probability of successful well development

• Seismic activity has no impact on property/environment

Exploration



• Producers conduct title search for mineral rights holders

• Land professionals work with property owners to establish lease agreements

• Leases give developers approval to explore for natural gas

• Leases reflect current market values and geologic conditions

• Property owners urged to contact attorney prior to entering lease

Leasing



• First focus is protection of groundwater

• Compressed air is circulated down drill pipe to lift rock cuttings past deepest groundwater zone

• Steel casing cemented in place along vertical wellbore

• Cemented casing isolates wellbore from groundwater

• Casing process continues vertically with smaller-diameter steel pipes

• Increased regulations to protect groundwater

Groundwater Protection



• Marcellus wells can be drilled vertically and horizontally

• Horizontal drilling yields more natural gas– Multiple wells drilled from a single

pad– “Laterals” drilled horizontally up to

5,000 feet, following natural fractures in shale

– Multi-well pad: Requires 6 acres– 24 vertical wells: Requires 100

acres

Horizontal Drilling

Line = 1,000 feet

Representation of horizontal drilling unit


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• Well typically drilled vertically to 500 above Marcellus Shale

• Curve from vertical to horizontal approximately 1,200 linear feet

• Continues horizontally for several thousand feet

• Final casing string cemented in place at end of well bore

• Approximately 15 to 30 days required to drill a horizontal Marcellus well

Horizontal Drilling



• Pipelines required to transport gas to market

• Gathering lines link wells to processing facilities/ transmission lines

• ROW for lines is negotiated with property owners

• ROW re-vegetated, restored, and maintained to ensure safety of delivery system

Infrastructure Improvements



• Vital to producing minerals from all geologic formations

• Proven technology, advanced over 60 years

• High-volume fracturing used for horizontal well development

• Process begins by perforating casing, cement and shale with perforating gun

• Charge from gun opens fissures in shale to release natural gas, sand necessary to expand and prop open fissures

• Water, small amount additives injected under high pressure to carry sand into fractures

Hydraulic Fracturing/Well Stimulation



Well Stimulation Fluids

Water and sand make up 99.95% of the well stimulation

Water 90%

Sand 9.95%

Chemicals 0.05%


Flowback Water Management

• Most drillers have achieved or are approaching 90% recycling

• 98% stored in tanks, no longer open pits. Open pits are now mostly all fresh water.

• Final disposal only in permitted facilities

• Must meet drinking water standards for Total Dissolved Solids (TDS)

20-30% FLOWS BACK FROM WELL


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•Peak water use will be 60 million gallons/day•At peak, water use will remain less than ONE PERCENT of state’s daily water consumption •Less than half the water used to irrigate Pennsylvania golf courses

Water Usage



• Significant short-term transportation challenges

• Roadways used for drill rig, support equipment, water truck and tank, and worker access to site

• Producers work with municipalities to maintain, improve roads, investing millions annually

• Local construction companies receiving most road maintenance contracts, estimated $200 million in 2010

Infrastructure Improvements


During Drilling Process

Initial Reclamation


• Once well is complete and producing, restoration begins

• Only a small wellhead on a constructed pad, less than one acre, remains

• Property restored to meet owner’s needs

• Similar to home construction

Restoration


• Multi-well Pad: Before and After

Restoration



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Financial Impact of the Oil and Gas Industry


Financial Impacts of Oil and Gas Development

Nationwide

•The U.S. oil and natural gas industry supports more than 9 million jobs nationwide.

•The industry supports over 7% of GDP, and contributes more than $86 million to

the Federal Treasury every day.

Pennsylvania (Currently)

•275,563 total statewide jobs provided or supported by our industry.

•$66,251 average salary for non-gas station oil & natural gas employees.

•$43,325 average annual salary in Pennsylvania across all industries and sectors.

•$15 billion contribution to Pennsylvania labor income.

•$28.4 billion contribution to Pennsylvania economy.


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Regulation of the Oil and Gas Industry


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Potential Permits Required for Gas Well


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Well Stimulation Additives



State Law Now Requires Posting on www.FracFocus.com

Upstream Americas

Governor’s Occupational Safety and Health Conference

Unsafe Acts are the major cause of Accidents!

Robin GrouetteProduction Operations Manager – Shell Appalachia

What do we mean by Safety?

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HSE, HSSE, Personal Safety, PSM, AI,LOTO,

HAZCOM, Environment,

BBSM, Security, STOP, MIE, OCA, OIA, ERP, PTW,

MOC…

Management of Change

Safety Philosophy

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Is Safety a Priority or a Value?

Why be Safe?It is humane (The Right Thing to do!)Legal ObligationBest for the Business

Why do Unsafe Acts/Condition OccurDon’t Know! Not AbleDon’t Care!

Appalachia TRIR YTD – It is a Journey!

Copyright of Shell Exploration & ProductionUpstream Americas - Appalachia

CONFIDENTIAL

Worker Safety Issues

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Worker safety issues at a drilling and extraction sites. Discuss the problems that were encountered and how the industry responded.

• Trips/Slips/Falls – work surface issues (weather)

• Hands• Falling Objectives• Equipment Movements• Driving • People Competencies/Skills• Language – Seismic• High Pressure/Fire• Chemicals

Response Education/Train, PPE, Investigations, Modify trucking Contracts to change behaviors,Modify Designs

Learn, learn , learn

Site Challenges

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Reaching remote well sites, transient work, changing workplaces, transportation, challenges for training, and training program specifics.

• Tight roads• Landowners• Cultural Differences, long way from

home• Driving • Orientation• Competencies

Response Open Houses/communications, road work, Education/Train, Incident Investigations, Modify trucking routes, logistic systems

Communicate, communicate, communicate and learn, learn , learn

Other Successes

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Other successes we have had with industry, counties, improving emergency response activities, interactions with OSHA, formation of the Pennsylvania Service, Transmission, Exploration, Production Safety (STEPS) work.

• Opportunity to provide education about the Industry• Participate in Local Emergency Planning Commissions (LEPC)

• Work w/ local Emergency Management Services• Road Transportation Safety Groups

• Contractor & Industry Forums• Sharing Best Practices with Others

1 The Path and Safety Challenge Associated With the Marcellus Shale in Pennsylvania Stephanie Catarino Wissman Executive Director Pennsylvania Governors.

Documents

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industry standards

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development of petroleum

natural gas industry

industry operations

statistics api

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