[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
NATURAL GAS--AMERICA'S
NEW ENERGY OPPORTUNITY:
CREATING JOBS, ENERGY
AND COMMUNITY GROWTH
=======================================================================
OVERSIGHT FIELD HEARING
before the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
Monday, February 27, 2012, in Steubenville, Ohio
__________
Serial No. 112-96
__________
Printed for the use of the Committee on Natural Resources
Available via the World Wide Web: http://www.fdsys.gov
or
Committee address: http://naturalresources.house.gov
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COMMITTEE ON NATURAL RESOURCES
DOC HASTINGS, WA, Chairman
EDWARD J. MARKEY, MA, Ranking Democratic Member
Don Young, AK Dale E. Kildee, MI
John J. Duncan, Jr., TN Peter A. DeFazio, OR
Louie Gohmert, TX Eni F.H. Faleomavaega, AS
Rob Bishop, UT Frank Pallone, Jr., NJ
Doug Lamborn, CO Grace F. Napolitano, CA
Robert J. Wittman, VA Rush D. Holt, NJ
Paul C. Broun, GA Raul M. Grijalva, AZ
John Fleming, LA Madeleine Z. Bordallo, GU
Mike Coffman, CO Jim Costa, CA
Tom McClintock, CA Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Jeff Denham, CA CNMI
Dan Benishek, MI Martin Heinrich, NM
David Rivera, FL Ben Ray Lujan, NM
Jeff Duncan, SC John P. Sarbanes, MD
Scott R. Tipton, CO Betty Sutton, OH
Paul A. Gosar, AZ Niki Tsongas, MA
Raul R. Labrador, ID Pedro R. Pierluisi, PR
Kristi L. Noem, SD John Garamendi, CA
Steve Southerland II, FL Colleen W. Hanabusa, HI
Bill Flores, TX Paul Tonko, NY
Andy Harris, MD
Jeffrey M. Landry, LA
Jon Runyan, NJ
Bill Johnson, OH
Mark Amodei, NV
Todd Young, Chief of Staff
Lisa Pittman, Chief Legislative Counsel
Jeffrey Duncan, Democratic Staff Director
David Watkins, Democratic Chief Counsel
------
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
DOUG LAMBORN, CO, Chairman
RUSH D. HOLT, NJ, Ranking Democratic Member
Louie Gohmert, TX Peter A. DeFazio, OR
Paul C. Broun, GA Madeleine Z. Bordallo, GU
John Fleming, LA Jim Costa, CA
Mike Coffman, CO Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Dan Benishek, MI CNMI
David Rivera, FL Martin Heinrich, NM
Jeff Duncan, SC John P. Sarbanes, MD
Paul A. Gosar, AZ Betty Sutton, OH
Bill Flores, TX Niki Tsongas, MA
Jeffrey M. Landry, LA Paul Tonko, NY
Bill Johnson, OH Edward J. Markey, MA, ex officio
Mark Amodei, NV
Doc Hastings, WA, ex officio
------
CONTENTS
----------
Page
Hearing held on Monday, February 27, 2012........................ 1
Statement of Members:
Johnson, Hon. Bill, a Representative in Congress from the
State of Ohio.............................................. 4
Prepared statement of.................................... 6
Lamborn, Hon. Doug, a Representative in Congress from the
State of Colorado.......................................... 1
Prepared statement of.................................... 3
Thompson, Hon. Glenn, a Representative in Congress from the
State of Pennsylvania...................................... 8
Prepared statement of.................................... 8
Statement of Witnesses:
Chase, Dr. Robert W., Chairman & Professor, Department of
Petroleum Engineering and Geology, Marietta College........ 72
Prepared statement of.................................... 73
Heller, Dennis J., President & CEO, Stephenson Equipment,
Inc., Harrisburg, Pennsylvania, on behalf of Associated
Equipment Distributor...................................... 67
Prepared statement of.................................... 68
Hughes, Christine T., Owner, Village Bakery, Della Zona
Restaurant and Catalyst Cafe............................... 76
Prepared statement of.................................... 78
Johnson, Nathan G., Staff Attorney, Buckeye Forest Council... 81
Prepared statement of.................................... 82
Krueger, Faye, Associate Deputy Chief, National Forest
System, Forest Service, U.S. Department of Agriculture..... 9
Prepared statement of.................................... 11
Looman, Ed, Executive Director, Progress Alliance............ 65
Prepared statement of.................................... 66
Papai, Michele M., Athens City Council, Ward 3............... 44
Prepared statement of.................................... 46
Pounds, Jack R., President, Ohio Chemistry Technology Council 39
Prepared statement of.................................... 41
Simmers, Richard J., Chief, Division of Oil and Gas Resources
Management, Ohio Department of Natural Resources........... 13
Prepared statement of.................................... 14
Stewart, Thomas E., Executive Vice President, Ohio Oil & Gas
Association................................................ 26
Prepared statement of.................................... 28
Taylor, Roland ``Butch,'' Business Manger, United Association
of Plumbers & Pipefitters Local 396........................ 35
Prepared statement of.................................... 37
OVERSIGHT FIELD HEARING ON ``NATURAL GAS -- AMERICA'S NEW ENERGY
OPPORTUNITY: CREATING JOBS, ENERGY AND COMMUNITY GROWTH.''
----------
Monday, February 27, 2012
U.S. House of Representatives
Subcommittee on Energy and Mineral Resources
Committee on Natural Resources
Steubenville, Ohio
----------
The Subcommittee met, pursuant to call, at 9:01 a.m.,
Eastern Gateway Community College, 4000 Sunset Boulevard,
Lecture Hall 2102, Steubenville, Ohio, Hon. Doug Lamborn
[Chairman of the Subcommittee] presiding.
Present: Representatives Lamborn, Johnson, and Thompson.
STATEMENT OF THE HON. DOUG LAMBORN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Mr. Lamborn. The Committee will come to order.
The Chairman notices the presence of a quorum which under
Committee Rule 3[e] is two Members. The Subcommittee on Energy
and Mineral Resources is meeting today to hear testimony on an
oversight hearing on Natural Gas--America's New Energy
Opportunity: Creating Jobs, Energy and Community Growth.
I want to say it is a pleasure to be here in Steubenville.
I want to thank you, Representative Johnson, for hosting us. I
serve on the same Committee as Representative Johnson does on
Natural Resources, and he is always talking about his home
district, the people here and the terrain and the needs. It is
just such a pleasure to be here. So thank you for your
hospitality.
Mr. Johnson of Ohio. Thank you, Mr. Chairman.
Mr. Lamborn. Under Committee Rule 4[f], opening statements
are limited to the Chairman and Ranking Member of the
Subcommittee; however, I ask unanimous consent that both
Members with me be permitted to give an opening statement and
to include any of the Members' opening statement in the hearing
record if submitted to the clerk by the close of business
today.
Hearing no objection, so ordered. I will recognize myself
for 5 minutes.
Thank all of you for being here today. I am Congressman
Doug Lamborn, and I represent the 5th Congressional District of
Colorado. I also serve as Chairman of the House Committee
Resources Subcommittee on Energy and Mineral Resources. Our
Subcommittee has broad jurisdiction over onshore and offshore
energy production on public lands. Many of us on the Committee
work to ensure the expansion of energy production in this
country to create job opportunities for hundreds of thousands
of Americans, to increase our energy security and to decrease
our reliance on foreign oil.
Today we are here in Steubenville, Ohio to discuss one of
the most secure sources of energy and technology our country
has to offer, natural gas production. The natural gas industry
has the potential to bring in billions of dollars of Federal
revenue, bring energy to our national economy, create good
paying jobs for thousands of Americans, and most importantly,
greatly contribute to the economies of the towns and cities
that benefit from this development.
The United States is blessed with some of the richest and
largest natural gas shale fields in the world. The Marcellus
shale, the Barnett shale, the Bakken formation are all
previously unproductive areas that have just recently become
extraordinarily productive gas and oil fields because of
hydraulic fracturing, a process that is now used in more than
90 percent of oil and gas production wells.
Hydraulic fracturing technology enables the development of
unconventional domestic oil and gas resources, such as the
Bakken formation in North Dakota and Montana, which is thought
to hold 4 billion barrels of oil, second only to Alaska and has
kept North Dakota's unemployment rate the lowest in the
country.
By encouraging policies that provide regulatory certainty
for the energy industry and foster the development of natural
gas, there is the potential for all communities to enjoy these
same benefits from energy production. While these technological
advances in horizontal drilling have helped spawn the economic
development of shale oil, it has benefited and revolutionized
domestic natural gas production by delivering vast amounts of
cheap natural gas for the U.S. underground shale rock
formations.
Shale gas production is one of the most rapidly expanding
trends in onshore domestic oil and gas exploration and
production today. In some areas this has included bringing
exploration, production and energy to regions of the country
that have seen little or no activity in the past. In 2000 shale
gas provided 1 percent of our nation's gas supplies. That is
just 12 years ago. Today it is 25 percent.
Half of the natural gas consumed today is produced from
wells drilled within the last 3 1/2 years. This technological
advancement and increased production has allowed once
struggling businesses to expand into extremely successful
business ventures within just the last few short years. It has
created job opportunities for unemployed Americans and
contributed to the coffers of many small communities.
While the Administration frequently touts its record of
increased energy production and its support for increased
natural gas production, their actions prove otherwise. In
November the Administration removed over 3,000 acres of the
Wayne National Forest from the leasing process pending a study
on hydraulic fracturing. This will simply serve to further
delay the creation of American jobs and energy production. This
action follows a proposal last year by the Forest Service to
ban the practice of horizontal drilling.
When questioned about a proposed ban on horizontal
drilling, BLM Director Bob Abbey said, ``I note for the record
that the BLM has no ban on directional drilling, and as a
matter of policy, the Bureau generally encourages its use where
appropriate to protect sensitive surface resources.''
Additionally, and unfortunately, the Department of the
Interior has announced plans to release Federal fracking
regulations for energy production on Federal lands in the near
future. Currently states are responsible for regulating oil and
natural gas development stemming from the use of hydraulic
fracturing. These state regulations have proved successful in
overseeing hydraulic fracturing, and the industry flourished
under this regime.
I also note for the record that in Colorado, if you have a
question or complaint, whether it is founded or not, you call
the state regulators. They are there sometimes the same day and
within 24 hours in every case.
These proposed BLM Federal regulations are much more
stringent, if not unreasonable, beyond any state regulations to
date. The proposed regulations would likely severely inhibit
natural gas production on Federal lands and greatly dissuade
companies from pursuing production on these lands.
I look forward to our witnesses' thoughts on how we can
successfully expand natural gas production and the benefits a
robust energy industry can bring to local communities while
protecting the important multiple use mission of our Federal
lands and protecting the environment responsibly.
Finally, I want to thank again Mr. Johnson for hosting us
here in his home district and our colleague from Pennsylvania,
Mr. Thompson, for being here as well. I regret that none of our
Democratic colleagues on the Committee took the interest in
this vital subject to join us at this hearing.
I want to thank our witnesses and guests for taking time
out of your schedules to be with us here today, and I look
forward to hearing from our panels.
I would like now to recognize Mr. Johnson for an opening
statement and then Mr. Thompson.
[The prepared statement of The Honorable Doug Lamborn
follows:]
Statement of The Honorable Doug Lamborn, Chairman,
Subcommittee on Energy and Mineral Resources
Thank you everyone for being here today. I'm Congressman Doug
Lamborn and I represent the 5th Congressional district of Colorado and
also serve as Chairman of the House Natural Resources Subcommittee on
Energy and Mineral Resources. Our subcommittee has broad jurisdiction
over onshore and offshore energy production on public lands and we work
to ensure the expansion of energy production in this country to create
job opportunities for hundreds of thousands of Americans, increase our
energy security, and decrease our reliance on foreign oil.
Today we are here in Stubenville, Ohio to discuss one of the most
secure sources of energy and technology our country has to offer--
natural gas production. The natural gas industry has the potential to
bring in billions of dollars of federal revenue, create good-paying
jobs for thousands of Americans and most importantly greatly contribute
to the economies of the towns and cities that benefit from this
development.
The United States is blessed with some of the richest and largest
natural gas shale fields in the world. The Marcellus Shale, Barnett
Shale and Bakken Formation are all previously unproductive areas that
are now extraordinarily new productive gas and oil fields because of
hydraulic fracturing--a process that is now used in more than 90% of
oil and gas production wells. Hydraulic fracturing technology is enable
the development of unconventional domestic oil and gas resources, such
as the Bakken Formation in North Dakota and Montana, which is thought
to hold 4 billion barrels of oil--second only to Alaska, and has kept
North Dakota's unemployment rate the lowest in the nation. By
encouraging policies that provide regulatory certainty for the energy
industry and foster the development of natural gas, there is the
potential for all communities to enjoy these same benefits from energy
production.
While these technological advances in horizontal drilling have
helped spawn the economic development of shale oil, it has primarily
benefited and revolutionized domestic natural gas production by
delivering vast amounts of cheap natural gas from U.S. underground
shale-rock formations. Shale gas production is one of the most rapidly
expanding trends in onshore domestic oil and gas exploration and
production today. In some areas, this has included bringing
exploration, production and energy to regions of the country that have
seen little or no activity in the past. In 2000, shale gas provided 1%
of our nation's gas supplies; today it is 25%. Half of the natural gas
consumed today is produces from wells drilled within the last 3.5
years.
This technological advancement and increased production has allowed
once struggling businesses to expand into extremely successful business
ventures within just a few short years. It has created job
opportunities for unemployed Americans and contributed to the coffers
of many small communities.
While the Administration frequently touts its record of increased
energy production and its support for increased natural gas production,
their actions prove otherwise. In November the Administration removed
over 3,000 acres of the Wayne National Forest from the leasing process
pending a study on hydraulic fracturing. This will simply serve to
further delay the creation of American jobs and energy production. This
action follows a proposal last year by the Forest Service to ban the
practice of horizontal drilling. When questioned about a proposed ban
on horizontal drilling BLM Director Bob Abbey, ``I note for the record
that the BLM has no ban on directional drilling and, as a matter of
policy, the Bureau generally encourages its use where appropriate to
protect sensitive surface resources.''
Additionally, the Department of the Interior announced plans to
release federal fracking regulations for energy production on federal
lands in the near future.
Currently, states are responsible for regulating oil and natural
gas development stemming from the use of hydraulic fracturing. These
state regulations have proven successful in overseeing hydraulic
fracturing and the industry has flourished under this regime.
These BLM regulations go significantly above and beyond any state
regulations to date and the proposed regulations would likely severely
inhibit natural gas production on federal lands and greatly dissuade
companies from pursuing production on those lands.
I look forward to our witnesses thoughts on how we can successfully
expand natural gas production and the benefits a robust energy industry
can bring to local communities while protecting the important multiple
use mission of our federal lands.
Finally, I want to thanks Mr. Johnson for hosting us here in his
home district and our colleague from Pennsylvania Mr. Thompson for
being here. I regret that none of our Democratic colleagues on the
Committee considered this matter important enough for them to join us
at this hearing.
I want to thank our witnesses and guests for taking time out of
your schedules to be with us today and look forward to hearing from our
panels.
______
STATEMENT OF THE HON. BILL JOHNSON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Johnson of Ohio. Thank, Mr. Chairman, for hosting this
hearing today. I would also like to welcome you and our
colleague, Representative Thompson, here to Steubenville, the
home of Dean Martin. I don't know if you know that or not, but
it is.
Mr. Thompson. I know it now.
Mr. Johnson of Ohio. It is.
Mr. Thompson. That is pretty cool.
Mr. Johnson of Ohio. Yes. But more importantly to today's
hearing, Steubenville sits atop the world's largest natural gas
deposits located in the Marcellus and the Utica shale. This
hearing today will shed some light on the many direct and
indirect economic opportunities that are coming to Eastern and
Southeastern Ohio because of oil and gas development, both new
and old technologies. But it is not just Ohio.
America is blessed with the largest energy reserves in the
world and according to the Congressional Research Service, the
United States tops Russia, Saudi Arabia and China when it comes
to reserves of oil, natural gas and coal.
Harnessing these resources is critical to Ohio's economic
prosperity. Right here in Ohio it is estimated we could see up
to 200,000 new good paying jobs come to Ohio with increased
natural gas and oil production. But the job opportunities that
will come from natural gas aren't isolated simply to harvesting
the resource. These new job opportunities will be in supporting
industries like manufacturing, housing, retail, entertainment
and service industries, just to name a few.
In the past few weeks alone, private companies not directly
involved in the harvesting of the oil and gas have announced
hundreds of millions of planned investments that will create
hundreds, if not thousands, of direct and indirect jobs. This
is just the tip of the iceberg, ladies and gentlemen. However,
you don't need to take my word for it, because ABC World News
report came here right to Steubenville last October and
highlighted the economic development that is coming to town. In
the report the anchor stated that 300 jobs had already come to
Steubenville and that another 10,000 jobs would be created over
the next 3 years.
While unemployment in Steubenville is still too high and
above the national average at 9.9 percent, this is a huge
improvement from when it was as high as 15 percent back in
2010. As we all saw last week, it is not just the private
sector and individuals that are benefiting from this
development. The City of Steubenville has also taken advantage
of their resources. Between selling excess water to companies
and by leasing land at the old landfill in town, Steubenville
will now have extra money to make long-term investments to
improve infrastructure, money that they otherwise would not
have had.
As I meet with senior executives and CEOs of the companies
coming to Ohio to develop the natural gas resources, I always
stress two very important points. In fact, I told the CEO of
Hess Corporation, whose company will be drilling at the old
city landfill in town, these important conditions when he came
to visit with me. I tell these executives that they need to
hire as many Ohioans as possible. These resources belong to the
hard-working people of Eastern and Southern Ohio, and Ohioans
deserve to be the ones as much as possible working on the rigs
and the associated projects.
That is why I have been working with Eastern Gateway
Community College and other educational institutions, trade
unions like the pipefitters union represented here by Butch
Taylor, and the energy companies, to ensure that our labor
force has the skills necessary for the jobs, that they are
given first priority when hiring starters. I also tell them
that Ohioans who decide to lease their land for development
must be treated fairly by their companies. Ohioans deserve to
be given a fair shake by these companies and should not be
taken advantage of.
All of these executives have given me their word to follow
these conditions, and, ladies and gentlemen, I will hold them
accountable if they do not live up to their word.
We have an opportunity to usher in a new era of American
exceptionalism with Ohio energy development if only the Federal
Government stays out of the way. However, the Federal
Government is doing everything it can to stand in the way of
growing our economy and creating jobs through increased
domestic energy production. The Department of the Interior is
in the process of developing new rules regulating hydrofracking
on Federal lands that will serve as the blueprint for the
Federal EPA rules and regulations that could stop all of this
development in its tracks.
As we will hear from Mr. Simmers from the Ohio Department
of Natural Resources later, the State of Ohio has been
regulating hydraulic fracturing for over 60 years and we do not
need bureaucrats from Washington, D.C. telling Ohio's
regulators how to do the job they have already been doing
responsibly for decades. I trust Ohio and Ohioans to know what
is best for Ohio rather than unelected bureaucrats in
Washington.
I must also point out that while there have been a lot of
scare tactics on the issue of hydraulic fracturing being thrown
around lately, the fact remains that there has not been one
single case in the over 100 million hydraulic fracturing jobs
nationwide that has resulted in the contamination of drinking
water.
Mr. Johnson of Ohio. Furthermore, when there were issues
with the earthquakes in the Youngstown area because of nearby
injection wells, the Governor and state regulators acted
quickly and shut down the wells. The Governor also ordered
additional monitoring of the injection wells to ensure early
detection of the injection wells and to monitor for future
seismic activity. They took immediate, prompt and prudent
action to base their decisions on science and fact, not on
political rhetoric or scare tactics.
Mr. Chairman, thanks again for taking the time to come to
Steubenville today all the way from Colorado to draw attention
to the excitement and the vast economic potential around energy
development in Eastern and Southeastern Ohio.
With that, I yield back the balance of my time.
[The prepared statement of The Honorable Bill Johnson
follows:]
Statement of The Honorable Bill Johnson, a Representative
in Congress from the State of Ohio
Thank you, Mr. Chairman for hosting this hearing and let me be the
first to officially welcome you to Steubenville, the home of Dean
Martin.
More importantly to today's hearing, Steubenville sits atop the
world's largest natural gas deposits located in the Marcellus and Utica
Shale formations.
This hearing today will shed light on the many direct and indirect
economic opportunities that are coming to Eastern and Southern Ohio
because of oil and gas development using both new and old technology.
But it's not just Ohio. America is blessed with the largest energy
reserves in the world and according to the Congressional Research
Service, the United States tops Russia, Saudi Arabia, and China when it
comes to reserves of oil, natural gas, and coal.
Harnessing these resources is critical to Ohio's economic
prosperity. Right here in Ohio--it is estimated that we could see up to
200,000 good-paying new jobs come to Ohio with increased natural gas
and oil production and related jobs.
But the job opportunities that will come from natural gas aren't
isolated simply to harvesting the source. These new job opportunities
will be in supporting industries like manufacturing, housing, retail,
entertainment, and service--to name a few.
In the past few weeks alone private companies not directly involved
in the harvesting of the oil and gas have announced hundreds of
millions of planned investment that will create hundreds if not
thousands of direct and indirect jobs. This is just the tip of the
iceberg.
However, you don't need to take my word for it because ABC World
News report came right here to Steubenville last October and
highlighted the economic development that is coming to town. In the
report, the anchor stated that 300 jobs had already come to
Steubenville and that another 10,000 jobs could be created in the next
three years.
While unemployment in Steubenville is still too high and above the
national average at 9.9%, this is a huge improvement from when it was
as high as 15% in 2010.
And as we all saw last week, it is not just the private sector and
individuals that are benefitting from the oil development, the City of
Steubenville has also taken advantage of their resources.
Between selling excess water to companies and by leasing land at
the old landfill in town, Steubenville will now have extra money to
make long term investments to improve infrastructure that they
otherwise would not have the money to pay for these much needed
upgrades.
As I have met with senior executives and CEOs of the companies
coming to Ohio to develop the natural resources I always stress two
important points.
And in fact, I told the CEO of Hess Corporation, whose company will
be drilling at the old city landfill in town, these important
conditions when he came to visit me.
I tell these executives that they need to hire as many Ohioans as
possible. These resources belong to the hard working people of Eastern
and Southern Ohio and Ohioans deserve to be the ones as much as
possible working on the rigs and the associated projects.
That is why I have been working with Eastern Gateway Community
College, other educational institutions, trade unions like the
Pipefitter's Union represented today by Butch Taylor and the energy
companies to ensure that our labor force has the skills necessary for
the jobs and that they are given first priority when hiring starts.
I also tell them that Ohioans who decide to lease their land for
development must be treated fairly by their companies. Ohioans deserved
to be given a fair shake by these companies and should not be taken
advantage of by these companies.
All of the executives have given me their word to follow these
conditions and I will hold them accountable if they do not live up to
their word.
We have an opportunity to usher in a new era of American
exceptionalism with Ohio energy development if only the Federal
Government stays out of the way.
However, the Federal government is doing everything it can to stand
in the way of growing our economy and creating jobs through energy
development.
The Department of the Interior is in the process of developing new
rules regulating hydraulic fracturing on federal lands that will serve
as the blueprint for new Federal EPA rules implementing regulations
that could stop all of this development in its tracks.
As we will hear from Mr. Simmer from the Ohio Department of Natural
Resources later, the State of Ohio has been regulating hydraulic
fracturing for over 60 years and we do not need bureaucrats from
Washington D.C. telling Ohio's regulators how to do the job they have
already been doing responsibly for decades.
I trust Ohio and Ohioans to know what's best for Ohio rather than
unelected bureaucrats in Washington.
I must also point out that while there have been a lot of scare
tactics on the issue of hydraulic fracturing being thrown around
lately, the fact remains that there has not been one single case in the
over 1 million hydraulic fracturing jobs nationwide that has resulted
in the contamination of drinking water.
Furthermore, when there issues with the earthquakes in the
Youngstown area because of nearby injection wells, the Governor and
state regulators acted quickly and shut down the wells. The Governor
also ordered additional monitoring of injection wells to ensure early
detection of the injection wells cause future seismic activity.
Mr. Chairman, thanks again for taking the time to come out to
Steubenville from Colorado to draw attention to the excitement and vast
economic potential around energy development in Eastern and Southern
Ohio. With that I yield back the balance of my time.
______
Mr. Lamborn. All right. Thank you. We are going to hear in
a moment from Mr. Thompson.
I would ask every member of the audience to be respectful
and to not interrupt or make noises and to be civil and respect
everyone's rights to listen. Thank you.
Mr. Thompson of Pennsylvania.
STATEMENT OF THE HON. GLENN THOMPSON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF PENNSYLVANIA
Mr. Thompson. Thank you, Chairman. Thanks for hosting this
Subcommittee bill hearing. And thanks, Mr. Johnson----
Mr. Johnson of Ohio. You're welcome.
Mr. Thompson.--for hosting us here and for, I perceive, the
opportunity to serve with you. I want to thank the witnesses on
this panel and all the panels for taking the time to come out
and to provide your expertise and your opinions. It is greatly
appreciated.
It is good to be in Steubenville. I have already learned a
little more about Steubenville, though I am a neighbor. I
represent the Pennsylvania 5th Congressional District. It is a
pleasure to be at this hearing, Natural Gas-America's New
Energy Opportunity: Creating Jobs, Energy and Community Growth.
I am from Pennsylvania's 5th District. This is an issue
that is very important to the future of this country. This is
an industry that has been around for a very long time. In fact,
my district is home to where Colonel Edwin Drake drilled the
very first commercial oil well, I think over 152 years ago at
this point. In fact, when it comes to natural gas, 15 of my 17
counties actually have had Marcellus. It has been in that
beginning epicenter as part of my district.
This is an important issue. It is a great issue to have a
field hearing on, to be able to weigh both sides and to look at
the opportunity and responsibility that come with it. I am
looking forward to hearing the witnesses. Myself, personally,
have seen what it has done in my district to move us toward
energy independence, affordable energy, clean energy, and jobs,
but also the importance of the responsibility side.
I am glad to see the agencies are represented here today. I
know in Pennsylvania I work very closely with the same or
comparable organizations, the Pennsylvania Department of
Environmental Protection, to look at what the issues are and
the role of state regulation and make sure it is the right
regulations and it is there for protecting both people and the
environment while maximizing this opportunity.
So I am going to yield back at this point and say thank
you, once again, for hosting this Subcommittee hearing.
I yield back.
[The prepared statement of The Honorable Glenn Thompson
follows:]
Statement of The Honorable Glenn `GT' Thompson,
a Representative in Congress from the State of Pennsylvania
I want to thank Chairman Lamborn for holding this important
hearing. And I also want to thank Representative Bill Johnson for
hosting us here today.
I also want to thank the witnesses for taking the time out of your
day to offer your expertise, this is greatly appreciated by this
committee.
It's great to be in Steubenville. And I'm not too far away, I
represent the 5th Congressional District of Pennsylvania. Similar to
Ohio's 6th District, Pennsylvania's 5th sits atop the Marcellus Shale.
My District and the Commonwealth have been producing energy for
some time, and our state has a long and storied history in energy.
In fact, Col. Edwin Drake drilled the world's first commercially
successful oil well in Titusville in 1859, which is also located in my
District.
More recently, Pennsylvania has been experiencing enormous economic
benefits with the development and production of the Marcellus shale gas
play. 15 of the 17 counties in Pennsylvania's 5th District have
Marcellus production occurring.
We've added over 100,000 jobs in the state, have lower than average
unemployment rates in many counties, and are growing our economy in
Pennsylvania.
Much of this success is directly tied to the Marcellus, energy
production, and related industries. This is good for my home state,
it's good for consumers, and it's good for the nation.
Nationally, hydraulic fracturing in oil and gas shale formations
has unlocked previously inaccessible and vast new energy supplies which
has lowered energy costs in regions across the country, offering new
incentives for more businesses to locate their operations here in the
U.S. and new economic fortune and added jobs to our local communities.
This energy development on state and private lands--regulated at
the state level--has flourished, and today's hearing goes to show
what's possible in terms of energy production and job creation when the
federal government is not there to interfere.
This is an important issue that we must continue to discuss, so
that we can look at the opportunities as well as the responsibilities
that come with development of our nation's domestic resources.
I look forward to hearing from our panelists. Thank you.
______
Mr. Lamborn. All right. Thank you. We will now hear from
our witnesses.
I would like to invite forward Ms. Faye Krueger, Associate
Deputy Chief, National Forest System, USDA Forest Service, and
Mr. Richard Simmers, Chief of the Division of Oil and Gas
Resources Management of the Ohio Department of Natural
Resources.
Like all of our witnesses, your written testimony will
appear in full in the hearing record. So I ask that you keep
your oral statements to 5 minutes as outlined in our invitation
letter to you and under Committee Rule 4[a]. With all of our
witnesses, after your 5 minutes are up, you are asked to speak
only in response to questions. Microphones are not automatic.
Excuse me. I think today they are automatic. So that is taken
care of.
The timing lights work like this: When you begin to speak,
our clerk will start the timer, and a green light comes on.
After 4 minutes a yellow light comes on, then the red light
after 5 minutes.
Ms. Krueger, thank you for being here, and you may begin.
STATEMENT OF FAYE KRUEGER, ASSOCIATE DEPUTY CHIEF, NATIONAL
FOREST SYSTEM, USDA FOREST SERVICE
Ms. Krueger. Mr. Chairman, Member of the Subcommittee, it
is a privilege to be here today to discuss the development of
natural gas on National Forest System lands and the
implications for job development, energy production, and
community growth. I would like to describe the national
perspective and then describe the situation here in Southeast
Ohio on the Wayne National Forest. Again, my name is Faye
Krueger with the National Forest System.
The Administration believes natural gas development is an
important component of America's energy portfolio, and it
supports our nation's security while contributing to the
portfolio of energy while considering surrounding communities
and protecting our landscapes and watersheds.
Across the country, national forests and grasslands
currently host over 19,000 operating oil and gas wells.
Approximately 4,200 of those 19,000 wells overlay Federal
minerals where the subsurface is Federally owned. Our current
estimate is we are producing about 16 billion barrels of oil
and 1 trillion cubic feet of natural gas per year. Our analysis
shows that this development has supported over 52,500 jobs with
labor income estimated at approximately $3.5 billion per year.
We are currently processing around 200 permits for drilling or
Master Development Plan across the nation, which would further
add to the jobs and amount of oil produced and gas.
Federal gas leases cover about 5.5 million acres of the
National Forest System lands. Federal royalties from leases on
National Forest System lands were more than $135 million in
calendar year 2009, and we will be updating these figures for
other years. Three-fourths of the oil and gas wells on National
Forest System lands overlay privately held mineral rights.
Where the subsurface mineral estate is privately held, Forest
Service works closely with the state and local government to
coordinate appropriate protection of surface resources.
Where National Forests overlay Federal minerals, the Forest
Service works closely with the Bureau of Land Management.
Coordination between the two agencies is outlined in a National
Memorandum of Understanding where BLM has a primary
responsibility for subsurface impacts and the Forest Service
has the primary responsibility for surface impacts. Here in the
Wayne National Forest there are 1,283 oil and gas wells. Two-
thirds of those overlay privately held minerals. Since 2006, a
total of 12 wells have been drilled, three of which overlay
Federal minerals and nine of which overlay non-Federal
minerals.
Last year responding to an expression of interest from
industry, five parcels with Federal minerals totaling about
3,300 acres were considered for lease sale. These parcels have
been identified as being available for lease in the 2006
analysis during the revision of the Wayne National Forest plan.
These parcels are in close proximity to the City of Nelsonville
along the Hocking River which flows through the City of Athens.
Local government officials, the President of Ohio University
and others sent letters of concern asking that the parcels be
withdrawn from the sale until additional environmental impacts
could be more closely examined.
In response to the request, the Forest Service and BLM are
working together to conduct a review of the information. This
review simply reflects the need based on existing regulation
for the Forest Service and BLM to evaluate other technical and
environmental information and consider any changed
circumstances since the decision was made in 2006. This
information will inform the decision maker whether to proceed
with the sale or update the environmental analysis.
This review also makes use of best scientific and technical
information before issuing drilling leases and is more
efficient than having drilling leases successfully challenged
in court at a later date.
These parcels sit on the edge of the Utica shale formation.
There may be some potential for use of horizontal drilling and
multistage hydrologic fracking and associated use of larger
water volumes to extract oil and gas. The Forest Service and
BLM, through this review, will look at potential environmental
impacts that are associated with developing shale gas to
determine if effects are still accurate as described from the
2006 analysis.
I would note that while we are reexamining potential leases
on Federally owned minerals and on a portion of the Wayne
National Forest, 3/4 of the 241,000 acres of the Wayne National
Forest is available for oil and gas development. This includes
almost 39,000 acres which overlay Federal minerals and 142,000-
plus acres that overlay private minerals. Again, we are
committed to contributing to the nation's energy needs and
moving forward with developing jobs.
I thank you for the opportunity to appear before you today
and answer any future questions you may have.
[The prepared statement of Ms. Kruegar follows:]
Statement of Faye Krueger, Associate Deputy Chief,
National Forest System, USDA Forest Service
Mr. Chairman and members of the Subcommittee, it is a privilege to
be here today to discuss the development of natural gas on National
Forest System lands and the implications for job development, energy
production and community growth. My name is Faye Krueger, Associate
Deputy Chief for the National Forest System. Accompanying me today is
Anne Carey, Supervisor of the Wayne National Forest. I would like to
describe the national perspective and then describe the situation here
in southeast Ohio on the Wayne National Forest.
This Administration believes natural gas development is an
important component of the all-of-the-above energy portfolio that
supports our nation's energy security, improves air quality, and
creates jobs. The responsibility of the U.S. Forest Service and the
rest of the Administration is to contribute to that portfolio while
ensuring the well-being of surrounding communities, and protecting our
landscapes and watersheds.
Across the country, National Forests and Grasslands currently host
over 19,000 operating oil and gas wells. Approximately 4,200 of those
19,000 wells overlay Federal minerals where the subsurface is federally
owned, not privately owned. Our current estimate is that these wells
are producing approximately 16 million barrels of oil and 1 trillion
cubic feet of natural gas per year. Our analysis shows that this
development has supported over 52,500 jobs, with labor income estimated
at over 3.5 billion dollars per year (Henry Eichman, Forest Service
Economist, Sept. 20, 2011--IMPLAN MODEL). In addition, we are currently
processing approximately 200 permits for drilling or Master Development
Plans across the nation, which could potentially add significantly to
the amount of oil and gas produced and jobs supported.
Federal gas leases currently cover over 5.5 million acres of
National Forest System lands. Federal royalties from leases on National
Forest System lands were more than 135 million dollars in calendar year
2009. We are currently working with the Department of the Interior's
Office of Natural Resource Revenue to update those figures. Across the
country, the Forest Service is analyzing additional lands which could
be made available for leasing.
Three-fourths of the oil and gas wells on National Forest System
lands overlay privately held minerals. Where the subsurface mineral
estate is privately held, the Forest Service works closely with state
and local government to coordinate appropriate protection of surface
resources.
Where National Forests overlay Federal minerals, the Forest Service
works closely with the Bureau of Land Management (BLM). Coordination
between the two agencies is outlined in a national memorandum of
understanding (MOU) where the BLM has primary responsibility for sub-
surface impacts and the Forest Service has primary responsibility for
surface impacts. (Memorandum of Understanding between United States
Department of the Interior Bureau of Land Management and Untied States
Department of Agriculture Forest Service Concerning Oil and Gas Leasing
and Operations, signed by Kathleen Clarke, BLM on April 5, 2006 and
signed by Dale Bosworth, Chief, U.S. Forest Service, on April 14, 2006)
Here on the Wayne National Forest there are 1,283 oil and gas
wells, two-thirds (62% or 790 of 1283) of which overlay privately held,
non-Federal minerals. A total of 12 wells have been drilled since 2006,
3 of which overlay Federal minerals and 9 of which overlay non-Federal
minerals, and all are conventional vertical oil and gas wells. The
typical foot print for each of these wells, once drilled and initial
reclamation is completed, is less than an acre. They produce relatively
modest amounts of oil and gas. The companies drilling these wells are
generally local independent producers. Although shale plays (oil and
gas trapped in geologic formations of shale rock typically 6-8000 feet
below the surface), are known to exist beneath the Wayne National
Forest, the Forest has not yet experienced the deep and horizontal
drilling and the associated high volume water use needed for that type
of multi-stage hydraulic fracturing.
Last year, responding to an expression of interest from industry, 5
parcels with Federal minerals totaling approximately 3,300 acres were
considered for a lease sale. These parcels had been identified as being
available for leasing in a 2006 analysis during the revision of the
Wayne National Forest Plan. These parcels are in close proximity to the
City of Nelsonville along the Hocking River which flows through the
City of Athens. Local government officials, the President of Ohio
University and others sent letters of concern asking that the parcels
be withdrawn from the sale until environmental impacts could be more
closely examined.
Prior to moving forward with leasing the specific lands in question
the Forest Service and the BLM are working together to conduct a
``Review of New Information (RONI).'' This review simply reflects the
need, based on existing regulations, for the Forest Service and the BLM
to evaluate new technical and environmental information and consider
any changed circumstances since it last made these lands available for
leasing in 2006. This review will inform the decision maker whether to
proceed with the sale or update the environmental analysis, thereby
making sure the leasing analysis in the Forest Plan adequately
addresses anticipated impacts and that any future leases will be
legally sound. Ensuring that the Forest Plan makes use of the best
scientific and technical information before issuing drilling leases is
significantly better, and more efficient, than having drilling leases
successfully challenged in court.
The parcels lay on the edge of the Utica Shale, an underground
geologic formation stretching across several mid-western states and
containing large amounts of trapped gas and oil deposits within the
shale. There may be potential for use of horizontal drilling and multi-
stage hydraulic fracturing and associated use of larger water volumes
to extract the oil and gas. While potential surface and subsurface
impacts would need to be analyzed, the Forest Service and BLM, through
this review, will look at potential environmental impacts that are
associated with developing shale gas to determine if the effects are
still accurate as described in the 2006 environmental analysis.
Together with the BLM, the Forest Service anticipates completing the
review within the next several months to determine whether to proceed
with sale of leases based on the 2006 analysis or whether changed
circumstances warrant continuing a more thorough environmental analysis
initiated with the RONI and providing for further public involvement.
We are committed to working with local and state government and other
members of the public in this process in the review of new information.
I would note that while we are re-examining potential leases on
federally owned minerals on the Wayne National Forest, including the
3,300 acres of the current lease parcels, three-fourths of the 241,000
acre Wayne National Forest is available for oil and gas development.
This includes almost 39,000 acres which overlay Federal minerals and
142,250 acres which overlay private minerals for which the Federal
government does not have a leasing role.
Again, we are committed to contributing to the nation's energy
needs and look forward to moving forward in developing our nation's
natural gas resources while protecting the well-being of surrounding
communities, as well as the landscapes and watersheds of our National
Forests and Grasslands.
Thank you for the opportunity to appear before you today and I look
forward to answering any questions you may have.
______
Mr. Lamborn. Thank you.
Mr. Simmers?
STATEMENT OF RICHARD SIMMERS, CHIEF, DIVISION OF OIL AND GAS
RESOURCES MANAGEMENT, OHIO DEPARTMENT OF NATURAL RESOURCES
Mr. Simmers. Mr. Chairman and Members of the Committee, I
appreciate the opportunity to be here today.
I am representing Ohio's Department of Natural Resources.
The Department of Natural Resources is the primary regulatory
authority for oil and gas development in Ohio. We also have a
primacy program for the underground injection control program
with the USEPA. I did submit a five-page testimony, but I am
going to speak off the cuff.
I am born, raised and educated in Ohio. I have Bachelor's
degrees in biology, geology and a Master's degree in geology,
all from the University of Akron. I was hired as a
hydrogeologist by ODNR to investigate contamination.
Contamination can occur, but if the proper statutes and
rules are in place and they are properly enforced, those can be
greatly minimized to the point where they are nearly
nonexistent. ODNR has a very good staff. We oversee oil and gas
drilling, production and the injection disposal operations very
well. As with any kind of energy development, drilling for
natural gas has its risks. All undertakings of man have some
degree of risks. The goal of ODNR is to, of course, minimize
the potential risks by having a good set of standards, which
may include statutes, rules, and in Ohio's case, conditions
that can apply to permits and then oversee in the field.
There have been many claims over the past 3, 4 years that
hydraulic fracturing has caused many groundwater contamination
events. That is not accurate. That is not to say that
contamination cannot occur, but it has not occurred through the
direct act of fracturing. The Groundwater Protection Council,
which is an organization of states that have injection
programs, commissioned a study. They posted this study, and
Ohio participated in this study.
The study evaluated groundwater contamination events over a
25-year period. And as Ohio's records of contamination were
reviewed, it was shown that although contamination did occur
and did occur for certain reasons, hydraulic fracturing was not
a cause of contaminations over that 25-year period.
Fracking has occurred in Ohio for many years. Hydraulic
fracturing, as we commonly know it, has occurred since the
early 1950s in Ohio, but another form of fracturing occurred
long before that. Like Pennsylvania, Ohio has a very long
history of oil and gas development. The fracturing that
occurred by hydraulic fracturing was done by explosives.
Nitroglycerin, dynamite were sometimes put down wells to
accomplish about the same goal as the hydraulic fracturing
process. In essence, it breaks the rocks creating greater
permeability so more oil or gas could be extracted from a
particular formation.
In 2010 Ohio completed a comprehensive change of oil and
gas law within the state. This is associated with Senate Bill
164. Senate Bill 165 was indeed the most comprehensive change
to oil and gas law in at least a 25-year period. As this bill
went through both the House and Senate in Ohio and votes
eventually took place, there was nearly unanimous agreement in
approving the bill. That agreement reflected, one, a good
knowledge by the Ohio Legislature in the content of the bill
and it also expressed a knowledge that the bill was important
and effective.
We have begun to implement that bill, and part of that
implementation includes the promulgation of rules. We have
begun that process. Now, Ohio has gone through a number of
reviews, and I would challenge the Federal Government to go
through similar reviews. Back in 1995, as part of a state
review process, Ohio voluntarily allowed others to come into
the state. The others included members of the Federal
Government which included the DOE and USEPA as well as other
state regulatory programs, the regulated industry and
environmental groups. These groups came in and reviewed the
effectiveness of Ohio's regulatory program. We had a follow-up
to that review in 2005. These reviews are available.
They go through and they identify the effectiveness of
different portions of the Ohio oil and gas regulatory program.
More recently, in 2010, we had a review by STRONGER, a group
that took over these state reviews, to include hydraulic
fracturing. Specific standards were developed for review, and,
again, the Federal Government, other state governments,
environmental groups and the regulated industry came into Ohio
and evaluated the effectiveness of hydraulic fracturing
regulations within Ohio.
A copy of that review is available under my testimony in an
electronic version. What these effectively said was Ohio is
very good at this. I would challenge the Federal Government to
come to the states and not just look at what they may provide
for us, but come to us and ask what can we provide for you.
Come to the states with the idea that maybe, maybe we do it
better than you. And we would like you to come to these states.
Last summer we had USEPA, the enforcement folks from USEPA
call and ask to come to Ohio so they could evaluate the
effectiveness of the Ohio regulatory program. As part of that
regulatory review, we had to explain how wells are drilled, how
fracking occurs and how wastes are disposed, yet they were
evaluating our effectiveness. Again, I would encourage the
Federal Government to come to the states to find out what they
can learn from us as well.
[The prepared statement of Mr. Simmers follows:]
Statement of Richard Simmers, Chief, Division of Oil and Gas Resources
Management, Ohio Department of Natural Resources
Chairman Lamborn and members of the House Subcommittee on Energy
and Mineral Resources, thank for the opportunity to testify today on
behalf of the Ohio Department of Natural Resources on this topic that
is so critical to protection and conservation of our precious water
resources and to the future development of energy in a safe and
reliable manner.
I am a professional hydro-geologist, with a Masters degree in
Geology from the University of Akron and was recently appointed as the
Chief of the Ohio Department of Natural Resources, Division of Oil and
Gas Resources Management (DOGRM). I have spent my entire professional
career (26 years) working with the DOGRM with an emphasis on
groundwater resource protection. I am a resident of Stark County, a
county with an extensive history of oil and gas resource development.
My family is dependent upon our private water well as our sole source
of domestic water supply. This is also true for most of my field
inspectors and enforcement staff. My staff and I share the strongest of
possible convictions regarding the importance of protecting Ohio's
groundwater resources. In order to maximize protection of groundwater
resources, it is absolutely critical that the states retain authority
to permit and regulate the development of oil and gas resources.
All energy resource development activities have associated
environmental and public safety risks. The question of our time is
``What is the best regulatory framework for managing those risks?'' The
states currently have authority to permit and regulate oil and gas
resource development, while the United States Department of the
Interior, Bureau of Land Management, oversees leasing, issues permits
and regulates oil and gas development on federal lands in coordination
with the states. Today there are some that believe in order to
adequately protect public safety; we must further expand the federal
bureaucracy through passage of the FRAC Act, requiring a federal permit
to stimulate a well by hydraulic fracturing. Some environmental NGOs
have called for expansion of U.S.EPA's powers in other areas including
rescission of the RCRA exemption, requiring produced water to be
managed and disposed as hazardous waste, subjecting hydraulic
fracturing and produced water disposal to the Toxic Release Inventory
reporting requirements. The proposed expansion of federal authority
would dramatically increase the cost of developing oil and gas
resources without improving environmental protections.
Beginning in 2007, a growing number of sources including various
media outlets, environmental NGO resolutions, and NGO blogs began to
claim or imply that thousands of alleged groundwater contamination
incidents across the country, including Ohio, had been linked to
hydraulic fracturing. Collectively, these accounts, including the movie
Gasland, have had a profound effect on public opinion. As a result,
there is a tremendous amount of misinformation circulating through the
internet about hydraulic fracturing. Anecdotal accounts and speculative
statements made by persons without credentials or expertise on the
topic are circulated, embellished and eventually treated and recycled
as established fact. In September, 2009, a consortium of 160 national,
regional, state, and local environmental and conservation organizations
sent a letter to Congress urging sponsorship of the FRAC Act stating
that ``our organizations represent communities across the country that
are concerned about drinking water contamination linked to hydraulic
fracturing operations. Reports of drinking water contamination come
from Colorado, Texas, Arkansas, Ohio, Pennsylvania, Alabama, and
Wyoming.''
As Ohio starts down the path toward shale gas development, state
leaders under the Kasich administration have been meeting with local
government officials to discuss issues and concerns. During those
meetings state officials are often surprised to learn the breadth of
local fears. At a recent meeting one municipal official asked what the
state was going to do when their municipal groundwater supply was
ruined by hydraulic fracturing. Based upon all this official had read,
it was not a matter of ``if'' but ``when'' they would lose their
municipal water well field. On September 6, 2011, a bill (SB No. 213)
was introduced to ban hydraulic fracturing in Ohio until U.S.EPA had
completed their study and the states had implemented all regulatory
enhancements in response to U.S.EPA recommendations.
As part of the call for federal oversight, there was a concerted
effort to undermine state agency credibility. In recent years, the
popular literature has painted a picture of oil and gas regulatory
agency officials as complicit, incompetent, indifferent, and an
obstacle to positive regulatory reform. The popular portrayal of
regulatory personnel stands in stark contrast with the sacrifices and
effort that I've personally seen over the course of my career. I am
proud to be a part of an agency composed of dedicated and competent
public servants who work around the clock to inspect oil and gas
resource development activities to ensure protection of groundwater
resources and public safety, including witnessing of hydraulic
fracturing operations.
The claims that Ohio has identified groundwater resources
contaminated by hydraulic fracturing are patently false. Hence, the
very premise undergirding the NGO demand for a federal takeover is
inaccurate and misguided. In August 2011, the Ground Water Protection
Council (GWPC) posted on line a report entitled State Oil and Gas
Agency Groundwater Investigations and Their Role in Advancing
Regulatory Reforms. This report can be viewed at http://fracfocus.org/
publications. The study includes an evaluation of Ohio DOGRM
groundwater investigations covering a 25-year period from 1983 through
2007. I personally participated in most of these investigations.
Notably, during the 25-year period, Ohio did not find any incidents
where groundwater contamination was linked to well stimulation
including hydraulic fracturing.
Stimulation by hydraulic fracturing has been a routine part of
completing most Ohio oil and gas wells in Ohio since 1951. During the
study period (1983-2007), the DOGRM estimates that nearly 28,000 oil
and gas wells were stimulated by hydraulic fracturing. The truth is
that the Ohio DOGRM, other state oil and gas regulatory agencies, and
the regulated industry have stellar track records relative to
protecting groundwater resources from potential impacts. All energy
development activities, including hydraulic fracturing operations, have
some level of associated environmental and safety risks. The risks
associated with hydraulic fracturing are well understood and are
routinely managed through the diligence of the Ohio oil and gas
industry and by the DOGRM through enforcement of state regulations.
Although Ohio has not identified a single groundwater contamination
incident linked to the specific practice of hydraulic fracturing, the
DOGRM has recognized the need to improve monitoring and record keeping,
including public disclosure of chemical additives, and has passed
legislation during the past year to accomplish those objectives. In
Ohio, SB-165 (2010) establishes notification and reporting requirements
to improve documentation of the process and composition of stimulation
fluids including additives.
Amongst other provisions, SB-165 establishes:
a. Clear well construction performance objectives that require
isolation of all Underground Sources of Drinking Water behind
cemented surface casing, and isolation of petroleum reservoirs
prior to, during and after well stimulation operations;
b. Notification of inspectors prior to commencement of
stimulation operations;
c. Immediate notification of an inspector upon detection of
defective cement or casing during well stimulation operations;
d. Submittal of additional records including job logs, pumping
and pressure charts, and invoices listing additives by volume;
and
e. Mandates for disposal of produced water generated during
the post-stimulation flowback process at Class II injection
wells.
The regulatory framework for hydraulic fracturing in Ohio has been
evaluated by a team of national experts. In December 2010, an
independent eight-person team appointed by STRONGER completed a review
of the DOGRM's regulatory framework for hydraulic fracturing against a
set of national guidelines developed in 2010.
STRONGER is the acronym for a multi-stakeholder, non-profit
organization named State Review of Oil and Natural Gas Environmental
Regulations, Inc. that evaluates state oil and gas agency regulatory
standards against a set of national guidelines. The original guidelines
were developed in 1990 by the Interstate Oil Compact Commission (IOCC)
and the U.S. Environmental Protection Agency (U.S.EPA). The published
guidelines developed by state, environmental, and industry
stakeholders, provided the basis for the State Review Process, a multi-
stakeholder review of state exploration and production (E&P) waste
management programs against the guidelines. In 2009, STRONGER expanded
their guidelines to include the practice of hydraulic fracturing. The
purposes of the State Review Process are to document the successes of
states in regulating E&P wastes and to offer recommendations for
program improvement.
After an in-depth review of the Ohio hydraulic fracturing
regulatory program was completed, the multi-stakeholder review team
concluded that the Ohio program is ``overall, well-managed,
professional and meeting its program objectives''. The review team
commended the DMRM for the following:
a) Strengthening Ohio Oil and Gas Law through amendments in
Senate Bill 165 (effective June 30, 2010);
b) Expanding well completion and hydraulic fracturing
reporting requirements;
c) Reviewing potential contaminant pathways during the permit
review process;
d) Strengthening enforcement tools;
e) Increasing field enforcement staff levels; and
f) Improved usage of the website to disseminate information.
[A full copy of the STRONGER review report can be viewed at
www.dnr.state.oh.us/Portals/11/oil/pdf/stronger_review11.pdf
Ohio Hydraulic Fracturing State Review]
The review team recommended that Ohio proceed with plans to
promulgate new regulations regarding well construction. Draft standards
have been developed and are currently under review through Governor
Kasich's Business Common Sense Initiative. Once this process is
complete, the DOGRM will make final amendments and submit the new
standards for approval through JCARR. We believe that the new well
construction rules are amongst the best in the nation and will further
strengthen protection of water resources.
Ohio is not unique in its efforts to strengthen well construction
standards or expand reporting requirements for hydraulic fracturing
operations including chemical disclosure. Ohio actively participates in
two state associations, the Ground Water Protection Council (GWPC) and
the Interstate Oil and Gas Compact Commission (IOGCC), which provide
forums for state regulators to interact and discuss positive regulatory
advancements with peers. The states and these associations are proving
to be the leaders that are driving regulatory enhancements throughout
our nation. By visiting the GWPC website at www.gwpc.org--Groundwater
Protection Council one can see the outstanding work that is being led
by the diligent efforts of my peers in other states. States are best
equipped to understand local geologic conditions, define protected
groundwater resources, and grasp the unique aspects of petroleum
reservoirs within their respective jurisdictional boundaries. States
will continue to provide the best regulatory framework.
While the states have been updating and improving regulatory
standards for years, only recently did federal government (BLM)
announce its intent to update their chemical disclosure requirements
associated with hydraulic fracturing. While anyone can claim to be a
leader, the true test of leadership occurs when one turns around and
determines if anyone is following. With regard to hydraulic fracturing,
the states have been, and will continue to be the standard bearers.
In conclusion, Mr. Chairman and Committee members, the states
should retain regulatory authority over the practice of hydraulic
fracturing. The states have established a strong track record of
performance, have demonstrated proven leadership, and will continue to
improve their regulatory standards, data management systems, and other
programmatic tools necessary to ensure protection of groundwater
resources and public safety.
Again, thank you for allowing me the opportunity to testify before
you today with an in-depth explanation of shale development in Ohio and
the authority given to ODNR to regulate it. I'll be happy to take any
questions you may have at this time.
______
Mr. Lamborn. OK. Thank you both for your testimony. We will
now begin our questions. We will have 5 minutes per Member for
questions for each round. We will have two rounds for these two
particular witnesses.
Mr. Simmers, you talked about the difference between the
Federal and the state regulation. I, too, in my home state of
Colorado believe that they are doing an excellent job. As I
mentioned earlier, any landowner has a concern, they call them
and they are there within 24 hours. Sometimes they are there
the same day to physically inspect what that concern is. Most
concerns end up being nothing that the well had anything to do
with. It is other issues. However, for peace of mind, it is
important to have that backup. It is important to have that
capability. It is important to have that regulatory oversight
should there be a problem that the drilling caused.
When you compare Federal and state, and I know you have
just been talking about this, would you rather have the Bureau
of Land Management oversee or the department that you are in,
and then why, here in Ohio? You already, I know, explained it,
but if you could go into a little more detail.
Mr. Simmers. In Ohio we have the expertise. We have the
budget in place to properly manage a fully staffed regulatory
program, and we hire trained professionals so they can go out
and oversee the work that may be associated with drilling, well
completion, production or even plumbing.
We, too, have a public complaint response policy in place.
Ohio's policy basically says that when a call is received--we
take complaints either as calls or letters--we respond either
the same day or within 24 hours as well. And we generate
written complaints and contact the complainant to identify the
validity of their complaint, and if indeed they do have a valid
complaint, how we address that complaint.
The state programs are effective, and I know they are
effective because we are members of a number of organizations.
I mentioned the Groundwater Protection Council, but we are also
members of the Interstate Oil and Gas Compact Commission.
Through these organizations the states meet on a regular basis.
Not only do we meet, but we have conference calls and a series
of meetings and seminars where we share our experiences. We go
through what works and doesn't work.
In this case, Ohio is kind of fortunate. Ohio's Utica shale
is being developed after some of the other shale plays are
being developed. In one sense, we have had the advantage of not
going first. So we have learned from problems that may have
occurred in other states, and we talk to those other states
very frequently and in great detail.
We have promulgated or created statutes that address it. We
are promulgating rules right now that will make us even more
effective at this regulation.
Mr. Lamborn. Are there things about Ohio's geology that are
different from the other 49 states?
Mr. Simmers. There can be. Obviously along the state line
with Pennsylvania, the geology can be very similar. Even with
those two states, there can be substantial differences in
geology. Geology is one of the factors you have to take into
account when you are regulating a particular agency,
organization or industry like oil and gas.
One of the things you have to look at is not only the
differences in the state or local setting, but also the
comprehensive package of statutes that may be in place. When I
hear that a Frack Act may occur and it may address fracking in
particular, it kind of bothers me, because fracking is only one
tiny component of the overall operation.
If you don't start out with a good permitting process, if
you don't start out with a good well construction--well
construction is kind of like the foundation of a building. If
you don't do that part right, then many problems can occur
later. So looking at one little component is not the way to go.
You have to look at the comprehensive package and see how the
statutes and rules relate to one another and can be used to
strengthen one another.
Mr. Lamborn. Thank you. Ms. Krueger, in my remaining time
in this first round, when do you expect the Forest Service to
complete their study?
Ms. Krueger. We are looking at the next 3 to 5 months to
get that study completed on the Wayne National Forest.
Mr. Lamborn. I might ask you more about that later.
At this point, I would like to recognize Representative
Johnson.
Mr. Johnson of Ohio. Thank you, Mr. Chairman. Thank you
both for your testimony here today.
Mr. Simmers, you may have responded to some of this already
in your opening remarks, but how long has the State of Ohio
regulated oil and gas development in the state?
Mr. Simmers. As an oil and gas agency since 1965. Any
regulation prior to that was mainly in the mining portion of
state government, and it had a primary purpose prior to 1965 of
protecting underground miners as oil and gas activities may
occur in the same area.
Mr. Johnson of Ohio. How long has the state regulated
hydraulic fracturing to harvest oil and gas?
Mr. Simmers. Again, it has regulated that practice since
the agency inception in 1965 and has continued to effectively
enforce that program.
Mr. Johnson of Ohio. I know you responded to this or you
asserted this earlier, but I want to just get it as a matter of
record again. In all of that time that the state has been
regulating hydraulic fracturing, has there ever been one proven
case in which the fracking job contaminated drinking water?
Mr. Simmers. No, there has not. That is one of the
frustrations in that. Misinformation is provided and then
perpetuated by individuals, by organizations and by the media.
Contamination can occur and has occurred, but not related to
fracking as the process.
Mr. Johnson of Ohio. Do you think that the State of Ohio is
doing an effective job regulating the oil and gas industry and
specifically your oversight of hydraulic fracturing?
Mr. Simmers. I know we are regulating this properly and
effectively.
Mr. Johnson of Ohio. Thank you for your answers and again
for being here today, and I appreciate that.
Mr. Simmers. Sure.
Mr. Johnson of Ohio. Ms. Krueger, in your testimony
announcing that the Wayne National Forest would no longer be
participating in the lease sale and I think, if I read the
testimony of Supervisor Carey who was going to be here I
thought--let me give you a quote. Based on new information and
increased public interest on natural gas exploration,
especially deep horizontal drilling, the forest will soon
assemble a team of natural resource specialists to do further
analysis. Is that correct?
Ms. Krueger. Yes, that is correct.
Mr. Johnson of Ohio. My first question is: What is the new
information that came about that led you to this decision?
Ms. Krueger. First, Anne Carey, the forest supervisor on
the Wayne, is sitting in the audience today. She is here.
What new information we have is we did not look at what
would happen with the surface resources for a different type of
drilling, this horizontal and fracking proposal that is out
there, bigger well pads, trucks getting in and out. So what was
given to us by the environmental community, like I said, the
university and some local concerned citizens, they wanted us to
look at those effects.
So we don't look at them just as far as water goes. We look
at them for all of our standards and guidelines in our forest
plan. So we look at T & E species if it is germane to that. We
look at water, air, several of our resources, to make sure our
standards and guidelines are in place should we lease. So what
we are trying to do is put a pause on the leasing, not stop it,
but let that leasing move forward and make sure that we have
looked at all of our environmental analysis that needs to be
looked at.
Mr. Johnson of Ohio. You stated that a team of natural
resources specialists will conduct further analysis. Can you
tell me who in on the panel?
Ms. Krueger. Our IT team, our interdisciplinary team?
Mr. Johnson of Ohio. I am sorry?
Ms. Krueger. You want to know what kind of members comprise
our interdisciplinary team?
Mr. Johnson of Ohio. Who is on the panel?
Ms. Krueger. Let me ask Anne, and I will find out.
On our panel for reviewing that is BLM, the state. We have
hydrologists, soil scientists.
Mr. Johnson of Ohio. Are there any specialists from the oil
and gas industry that have been conducting fracking operations
for the last 60-plus years on the panel?
Ms. Krueger. No.
Mr. Johnson of Ohio. I am not sure I understand how we can
get valid analysis of how hydraulic fracturing is going to
affect the Wayne without having some specialists that
participate in that industry.
You further stated that this group will review the best
scientific information available with regard to the surface
effects of deep horizontal drilling and lateral hydraulic
fracturing. Are you aware that EPA Administrator Lisa Jackson,
the Federal EPA Administrator, has said in a public
Congressional hearing there is no proven case that a fracking
job contaminates or has ever contaminated the drinking water?
Ms. Krueger. I am not aware of any study that has shown
that.
Mr. Johnson of Ohio. Well, the EPA Administrator has stated
that. So it would be reasonable to assume that the EPA has
conducted those studies; correct?
Ms. Krueger. Correct.
Mr. Johnson of Ohio. I will yield back. We may have another
round.
Mr. Lamborn. OK. We will have another round. So you will
have the opportunity to continue.
Representative Thompson?
Mr. Thompson. Thank you, Chairman. Deputy Chief, it is good
to see you.
Ms. Krueger. I am the Associate Deputy Chief.
Mr. Thompson. Associate Deputy Chief. Well, maybe I just
promoted you.
[Laughter.]
Ms. Krueger. Thank you.
Mr. Thompson. Actually thank you so much. It is good to see
you. As you know, my role is on another Committee of
jurisdiction, the Agriculture Committee. I chair the
Subcommittee that has jurisdiction over our national forests.
You have been a great partner to work with, and I appreciate
your work.
A couple of questions for you. My understanding in that
regards, under the multiple uses of the national forests--they
are not national parks clearly--national forests, here is my
understanding, and I want to get your reaction if I am anywhere
close, that they were created really under multiple uses and
primarily initially to make sure that this nation has the
resources that it needs to be able to keep this country strong.
It is the kind of resources actually that built this country.
As a part of that multiple use is the access to minerals, oils
and natural gas. Is that your understanding as well?
Ms. Krueger. Correct. We are under the Multiple Use
Sustained Yield Act, and part of that is providing energy to
the American people, absolutely.
Mr. Thompson. If you don't know the exact numbers of years,
that is fine. Just approximate. How many years has the Forest
Service been involved in providing energy resources?
Ms. Krueger. I am thinking from the mid-'40s, mid-'30s,
hundreds. I have a specialist here in oil and gas.
Mr. Thompson. I know my national forest, which was
originally and still is an oil field and natural gas field, the
Allegheny National Forest, was formed almost 90 years ago
actually, and it has great multiple uses. Ohio seems wonderful.
I invite everybody from Ohio to come visit the Allegheny
National Forest in Pennsylvania.
Given the fact we have at least a century for the Forest
Service to have experience with this, in terms of the
subsurface, the hydrofracking--because that seems to be the
thing that is most contentious. So the more discussion on that
the better, I think, to bring in different perspectives.
In your experience, has there been negative environmental
damage, harm to persons or the environment over that hundred
years, or it has been 60 years since we have been doing
hydrofracking, on the Forest Service, just talking about the
Forest Service because I want to keep you where you have
responsibility for.
Ms. Krueger. Again, there have been fracking with oil and
gas wells, fracking in general, for decades. And so, you know,
I believe you said it correctly when it is done properly, we
don't have the issues.
Again, we want to make sure that we follow rules and
regulations, that we look at all potential environmental
impacts and provide for those so that none of that does occur.
So what we are doing is we are getting prepared to make sure we
have everything in place when that horizontal hydrologic
fracking does occur in the forest. So I don't know of any
particular study that has shown negative effects from that.
Mr. Thompson. Right. In fact, before this joint
Subcommittee, my Subcommittee in Agriculture and Mr. Lamborn's,
we had a joint committee. We had representatives from the
Forest Service and I think it was Director Abbey from the
Bureau of Land Management. I specifically asked that question
about how many wells have been drilled hydrofrack in this
country. The answer was a million. And I just zeroed it in to
the taxpayer-owned lands, Forest Service lands, Bureau of Land
Management, and his response in terms of the environmental
impact secondary to hydrofracking--and we are talking the act
of hydrofracking--the response was zero.
How closely does the Forest Service work with the state
environmental regulators and how important is that?
Ms. Krueger. Well, we work closely with the state. It is
important to make sure, again, for protection for all the
resources. Different states have different water rules, and
different states have different authorities with EPA. So we do
work closely throughout the country with our state regulators.
Mr. Thompson. I guess the different rules tend to make
sense because the geology is a little different. The hydrology
is a little different.
Well, well. Normally they just say the gentleman's time has
expired.
[Laughter.]
Voice. That is what happens when you run out of energy.
Mr. Thompson. There you go. You go into the dark.
One quick clarification because I think I borrowed a few
extra seconds, Chairman, when the electricity went out.
In terms of actual subsurface, whether it is taxpayer-owned
national forests or government-owned--well first clarification,
if the taxpayers own the subsurface rights in the forest, is it
the Forest Service that has jurisdiction or the Bureau of Land
Management for the subsurface?
Ms. Krueger. For the Federally owned minerals, the
subsurface is regulated by BLM.
Mr. Thompson. Bureau of Land Management?
Ms. Krueger. Right.
Mr. Thompson. Then can the Forest Service stop, really just
stop and prevent leasing when the subsurface rights are
privately owned and held?
Ms. Krueger. When the private mineral rights are privately
owned, we cannot stop that, correct.
Mr. Thompson. I thank you, Chairman. I yield back. I look
forward to the second round.
Mr. Lamborn. OK. Thank you. The second round here.
Ms. Krueger, if the study comes back with certain findings,
is it possible that there will not be government gas under that
particular condition?
Ms. Krueger. As we do this review of new information, if we
find that something is inadequate in the forest plan the way
they laid out the standards and guidelines, we would go back
and have further environmental analysis done. It doesn't mean
we would stop the lease, but we would open it up for public
comment to give us more information. And we would look at what
additional standards and guidelines or stipulations we would
need to have in order to move a lease sale forward.
Mr. Lamborn. So you are saying you don't anticipate it
being shut down completely?
Ms. Krueger. We don't anticipate it being shut down. What
we are looking at, again, is to make sure that as we move
forward and a different technique is used, that we have the
correct environmental standards and guidelines in place to have
a successful lease program.
Mr. Lamborn. You do realize that horizontal drilling, if
that is the concern, is actually less disruptive to the
surface, spot by spot, instead of going down and branching out?
Ms. Krueger. Our understanding is and what we are looking
at is collectively you may have a larger drill pad site, but
you won't have as many of those. You will also be using
different water quantities, and there could be different truck
traffic patterns, that type of thing, that go on. So those are
the things that we would look at in addition to the other
surface disturbances that could occur.
Mr. Lamborn. Thank you.
Mr. Simmers, the Utica formation is in general--and I know
I am asking you to generalize here--but in general, how deep
from the surface?
Mr. Simmers. Six to 8,000 feet deep in general.
Mr. Lamborn. How deep are normal groundwater supplies in
Ohio?
Mr. Simmers. They can range from a few tens of feet to in a
few parts of the state in excess of a thousand feet, although
the very deep groundwaters are not widespread.
Mr. Lamborn. So it is generally in the hundreds?
Mr. Simmers. It is generally in the hundreds. Back in the
early '80s, ODNR adopted the Safe Drinking Water Act as its
standard. We protect groundwaters in Ohio to a standard of
10,000 milligrams per liter TDS, total dissolved solids. In the
early '80s, we mapped the base of that defined strata of water.
As part of our protective casing program, we required
casings that are specific to water protection be set through
the entire length of that USDW or underground source of
drinking water.
Mr. Lamborn. I will get to that in a second. You said the
Utica is 6,000 to 8,000 feet. So at a minimum, there is 5,000
to 7,000 feet of rock between the water and the gas, a mile of
rock or more.
Mr. Simmers. Typically, at least in the easternmost
counties, yes.
Mr. Lamborn. So what do you do as a regulator to ensure
that that difference is protected so that no gas gets into the
water up at the top from the gas down below?
Mr. Simmers. This is part of that comprehensive statute
rule package. You cannot say let us regulate fracking and do it
properly without doing all the other component parts of oil and
gas regulation. You have to first identify what you want to
protect. We have done that. You have to then develop a plan to
say how you are going to protect it. We have done that.
You have to do very critical reviews of the applications
that the industry submits to you to make sure they meet those
criteria. Then you have to have good oversight in the field.
You have to actually watch to make sure what is required is
being met. Then you have to have an authority in cases where
the construction did not go as it should have, where you can
require the company to take corrective action if necessary or
potentially plug the well and start over.
What we require are multiple layers of steel casings
cemented in place to form multiple isolation barriers so when
the fracking process does occur, there are many, many layers of
protection to protect the fresh water.
Mr. Lamborn. Thank you. I appreciate that answer. Some
people, frankly, are not aware of that. It is good to have that
explained.
Now, when the EPA came out, can you clarify, what did they
not understand? That was mind boggling to me. What did you have
to explain to them that they didn't get?
Mr. Simmers. Well, no disrespect to the individuals that
came out, but they don't do oil and gas development. They were
asked to come out, evaluate how effective our regulatory
program is. To have some idea how effective we were, we had to
explain how drilling occurs and how fracking occurs.
Mr. Lamborn. They didn't know that?
Mr. Simmers. No.
Mr. Lamborn. Wow.
Representative Johnson?
Mr. Johnson of Ohio. Thank you, Mr. Chairman.
Ms. Krueger, you mentioned that you have a close working
relationship with the state Department of Natural Resources and
the EPA; is that accurate?
Ms. Krueger. With different states different relationships
between the Forest Service and the state, yes.
Mr. Johnson of Ohio. Are there any members of the Ohio
State Department of Natural Resources or the State Department
of the EPA on this evaluation panel?
Ms. Krueger. We have been collecting data, and we plan to
set up a meeting with them next month.
Mr. Johnson of Ohio. But there are no members, there are no
formal members of the panel from the state?
Ms. Krueger. Right.
Mr. Johnson of Ohio. From the state regulators?
Ms. Krueger. No. We have not identified any formal members,
no, although we will be working with them.
Mr. Johnson of Ohio. So it is totally a Washington deal.
Mr. Simmers, has anyone from that panel contacted your
office for an assessment or your input?
Mr. Simmers. Not that I am aware of.
Mr. Johnson of Ohio. Deputy Chief Krueger, is the geology
of the earth the same in Ohio as it would be, say, in Colorado?
How about something closer to Steubenville. How about over in
West Virginia or even my colleague's area over in Pennsylvania,
would the geology in West Virginia and Pennsylvania be the same
as Ohio?
Ms. Krueger. Conferring here, it is not exactly the same,
but there are many similarities.
Mr. Johnson of Ohio. I didn't think so. So how then does it
make sense for the Department of the Interior and possibly the
Federal EPA to issue a one size fits all rule to hydraulic
fracturing when it is very clear from Mr. Simmers' testimony
the EPA doesn't even know about hydraulic fracturing?
Ms. Krueger. I understand your question. It is a good
question. I cannot speak for the Bureau of Land Management or
the EPA.
Mr. Johnson of Ohio. I understand, and I appreciate that.
It seems to me--and let me make something very clear. I am not
a no-regulation person. Where it concerns public safety, public
health, national defense, national security, I believe in
common sense regulations. I think to me though the regulators
in this particular instance who have been doing a wonderful job
for many, many years right here at home know a lot more about
what it takes to protect Ohio's resources than bureaucrats in
Washington D.C.
With that, Mr. Chairman, I yield back. Thank you.
Mr. Lamborn. OK. Mr. Thompson?
Mr. Thompson. Thank you.
Chief Simmers, you actually addressed my first question I
had outlined here, and it was regarding basically groundwater
resources being contaminated by hydrofracking and if that
hasn't occurred in Ohio, which you did talk about--you talked
about that obviously there are some other risks--that what is
in place with the actual act of hydrofracking protects
groundwater.
I am just curious if you can tell me a little bit about
what some of those other risks might be when it comes to
natural gas, what kind of regulations, rules has your agency
promulgated to address those.
Mr. Simmers. The types of contamination can be multiple.
They can be brines. They can be crude oils. They can be natural
gas that can get into the subsurface and potentially even into
the sources of underground drinking water. That is why it is
critical to make sure the wells are constructed properly.
Mr. Thompson. So when you say get into the surface, these
are things that are sitting on the top of surface, on the
ground?
Mr. Simmers. Well, it can happen two ways. Contamination
can occur through the underground or from the surface. We have
addressed those potential pathways for the underground sources.
It doesn't mean they are totally eliminated. But Ohio places
the highest priority on public health and safety and
environmental protection. And we have our statutes in place to
do that, to accomplish that.
Most of the historic contamination has been associated with
surface, either through historic practices which are no longer
allowed, or through spills that might occur. And those, too,
are being addressed through statute and rules.
Mr. Thompson. In your testimony you showed a copy of it,
but I am looking for it online to get a copy of the report from
an organization called STRONGER. Talk a little bit about what
is the make-up of that organization. Is it nonbiased? Are there
stakeholders that represent all aspects, or is this just
strictly an industry-driven organization? From your testimony,
I understand they do an assessment of state oil and gas
environmental regulations.
Mr. Simmers. The STRONGER group, which I am going to read
their title, it is the State Review of Oil and Natural Gas
Environmental Regulations. That is the title of the
organization.
This used to be part of what was a state review process
that was originally run through the Interstate Oil and Gas
Compact Commission. When it was in that forum, it was
originally funded by the Department of Energy and the USEPA. At
some point the funding dried up. It was a very effective
program in its original forum, and many of the states, many of
the Federal agencies wanted it to continue.
It now receives private funding to a large degree to
continue this type of operation, but it is still a
multistakeholder organization. The Federal Government is still
included through the board. USEPA, DOE are involved, states,
the regulatory program within the states, and environmental
organizations as well as members of the regulated industry are
all members of the board of this group.
Mr. Thompson. Congratulations on the state's, I guess for
lack of a better word, report card under that organization.
Mr. Simmers. Thank you.
Mr. Thompson. In your opinion, and I know Mr. Johnson and
the Chairman kind of addressed this, but there is a real push
by just a few people in Washington to have the Federal
Government really take over oversight of natural gas drilling,
the Frack Act in particular. What are the potential risks of
that for making sure this industry is done in a proper
environmentally sound way?
Mr. Simmers. We have mentioned potential differences in
geology which are very important to consider. Even with the
comprehensive statutes and rules that we have on the books in
Ohio, we have an authority to place site specific conditional
requirements on individual permits. You can look at geology as
a whole, but you have to look at the overall picture, again,
from the time you permit a well until you begin producing or
ultimately plug that well. Conditions can include those that
are very specific to a well that might be in some proximity to
a public water well field. You have to have the flexibility to
adjust the permit and the operating requirement on a particular
company to not just the geology, but to many other factors as
well.
Mr. Thompson. Thank you, Chairman. I yield back.
Mr. Lamborn. All right. I want to thank both witnesses for
being here. I would like to ask that if any of us on the panel
have a question for you in writing, that you would respond to
those as well.
Mr. Simmers. Of course.
Ms. Krueger. Can I make one more comment or no?
Mr. Lamborn. No, because we do have two more panels to
hear. Thank you.
I would like to now invite forward the second panel, Mr.
Tom Stewart, Executive Vice-President of Ohio Oil & Gas
Association; Mr. Roland Butch Taylor, business manager,
Plumbers & Pipefitters Local 396; Mr. Jack Pounds, President of
the Ohio Chemistry Technology Council, and Ms. Michele Papai,
City Council, Ward 3 at the Steubenville City Council.
Ms. Papai. Athens, Ohio.
Mr. Lamborn. Excuse me. Athens, Ohio.
Ms. Papai. Thank you, sir.
Mr. Lamborn. Like all of our witnesses, your written
testimony will appear in full in the hearing record. So I ask
that you keep your oral statements to 5 minutes as outlined in
our invitation letter to you and under Committee Rule 4[a].
With all of our witnesses, after your 5 minutes are up, you are
asked to speak only in response to questions, and the timing
lights work with your 5 minutes first green. Then after 4
minutes it turns yellow, and then at the end of 5 minutes, the
red light comes up. So thank you for being here.
We will now go to Mr. Stewart. We will just go down the
line.
STATEMENT OF TOM STEWART, EXECUTIVE VICE-PRESIDENT, OHIO OIL &
GAS ASSOCIATION
Mr. Stewart. Chairman Lamborn, Ranking Member Holt and
Committee Members, good morning and welcome to Ohio.
For over a century and a half, Ohio has been blessed with
production of plentiful oil and natural gas resources. At each
critical moment in our industry's history, it has been changes
wrought by technology that has provided producers the ability
to explore new horizons, and expand the resources base. Today
the ability to horizontally drill a deep underground reservoir
with exacting precision exponentially exposing the base of the
reservoir rock to the wellbore has created massive efficiencies
in our ability to produce oil and gas.
Ohio is now beginning a new era of oil and gas exploration
made possible by technology that is unlocking reservoirs that
until now were not accessible. For our entire history, we
explored oil and gas from reservoirs where it had been trapped
after migrating over eons from source rock where oil and gas
had been formed and cooked in nature's kitchen. Now we are
drilling into the actual source rocks where most geologists
believe 95 percent of the oil and gas still remains in place
even after feeding the traps that have produced all of the oil
and gas that we have found to date.
This is a radical departure from America's recent
understanding of energy dependency. The resource shale play
resets the clock on readily available American-produced oil and
natural gas resources providing Americans with a secure supply
of reliable and efficient energy. Already shale production has
fundamentally changed domestic energy markets. Past market
history tells us that natural gas should be priced at a ratio
of 6:1 with crude oil, meaning a price of $17.50. Instead the
markets are pricing natural gas at $2.60 or 40:1 of crude.
In other words, today the industry is providing the
American consumer an incredible energy bargain providing
natural gas priced at 15 percent of its intrinsic energy value,
a trend that the marketplace indicates will continue in the
future. It is also enticing the chemical industry to reenter
the United States and build new chemical manufacturing
facilities.
What does this all mean for Ohio? Since 1860, Ohio has
produced over 8.5 trillion cubic feet of natural gas and 1.14
billion barrels of oil. The state's geologists recently
provided a volumetric calculation to estimate the recoverable
reserve potential of the Utica shale. They reported that should
producers extract just 5 percent of the oil and gas in place,
leaving 95 percent of resource in the rock, Utica would
generate 15.7 trillion cubic feet of natural gas and 5.5
billion barrels of crude oil. This is an astonishing number, an
enormous perhaps once in a lifetime opportunity.
Clearly America's opportunity using shale gas and shale oil
resources hinges on the regulatory structure as well as
development. Managing environmental risk has been a key part of
the state and Federal regulation. It remains important to keep
an appropriate balance between these governmental rules.
States have historically been the regulator of well
construction and completion. They have the expertise to permit
new wells and should continue to be the regulatory authority.
States and Federal agencies share the responsibilities of
regulating waste discharges. States typically issue direct
permits under broad Federal guidelines. The balance is
appropriate and should be continued because states understand
the potential unique issues in this area.
Because of the diversity of conditions associated with oil
and natural gas production, the regulatory process must be
flexible and reflect the unique conditions of the state or
areas within the state. It requires the technical expertise
that has been developed in each state and which does not exist
within some Federal agencies. For this reason Federal law has
generally deferred to the states for regulation of this
industry. Over time states have been engaged in a process that
validates their regulatory ability, identifies regulatory gaps
and provides a process to close those gaps and improve
respective regulatory programs.
As mentioned earlier, the state review of oil and natural
gas environmental regulations, STRONGER is an independent state
board and governing body that manages the state review process.
The process represents a stakeholder-driven collaborative
effort working together to develop a regulatory framework at
the state level that effectively protects the environment while
recognizing unique, historic, geologic and topographic
characteristics of oil and gas developed among the states.
STRONGER recently upgraded the review guidelines to include
a specific section focusing on hydraulic fracturing. Over the
past year, STRONGER has done frack specific reviews in six
states. In Ohio, following implementation of new law, STRONGER
conducted the hydraulic fracturing specific state review. The
review concluded that the Ohio program was overall well
managed, professional and meeting its program objectives. The
state review process demonstrates the states are the best and
most efficient point to regulate the industry's waste stream.
Regarding Federal land, over the past several years, new
rules, policies and administrative actions made it more
difficult for oil and natural gas producers to operate on
Federal and tribal lands. The Department of the Interior has
recently indicated it is in the process of promulgating new
rules for hydraulic fracturing. The resultant loss of
production not only impacts the Federal treasury, but it also
hurts businesses and local communities throughout the region
that rely on multiple use of Federal lands as the backbone of
the economy.
The Wayne National Forest located in Southeastern Ohio is
an excellent example of this.
Mr. Lamborn. Mr. Stewart, could you start to wrap up here
because our 5 minutes are up.
Mr. Stewart. The proposed regulations to govern hydraulic
fracturing on Federal lands are redundant to what states are
already doing to manage the environment and doing well
according to EPA Administrator Lisa Jackson, and will only
further delay an already slow approval process for oil and gas
operations.
[The prepared statement of Mr. Stewart follows:]
Statement of Thomas E. Stewart, Executive Vice President,
Ohio Oil & Gas Association
Chairman Lamborn, Ranking Member Holt and committee members of the
House Committee on Natural Resources, Subcommittee on Energy and
Mineral Resources, good morning and welcome to Ohio. I want to
recognize Congressman Bill Johnson for his distinguished representation
of the people who live within the 6th Ohio Congressional District who
are hosting this field hearing today
I am Thomas E. Stewart, Executive Vice President of the Ohio Oil &
Gas Association (OOGA), a state-based trade association representing
the common interests of over 1,900 members who are engaged in the
exploration and production of crude oil and natural gas resources
within the State of Ohio. The Association has represented the Ohio
industry since 1947. The Association also is an active cooperating
association in alliance with the Independent Petroleum Association of
America (IPAA), based in Washington D.C. Since 1929, IPAA has
represented thousands of independent petroleum and natural gas
producers throughout the nation. Independent producers drill 90 percent
of wells within the United States
Today's hearing is focused on the development of America's reliable
energy opportunities, particularly as they relate to new supplies of
domestically produced natural gas, natural gas liquids and crude oil
produced from the resource shale play. I will also comment on the
regulatory approaches that will help govern development of the
resource. My comments will focus on how these events are impacting
Ohio; the relationship between federal and state-based regulatory
policy; and the process that validates the long-standing principle that
the states are best suited to regulate the industry in order to protect
the public interest and ensure protection of human health, safety and
the environment.
For over a century and a half Ohio has been blessed with production
of plentiful oil and natural gas resources. At each critical point in
our industry's history it has been changes wrought by technology that
have provided to producers the ability to explore new horizons, expand
the resource base, and establish new reserves. Significant events
include the development of the rotary drill bit, wire line logging,
seismic technology lending an eye to what's underground, and the
development of hydraulic fracturing in 1947 that by 1953 revolutionized
and rejuvenated the productive capacity of wells in Ohio and across the
nation.
Today, the ability to horizontally drill a deep underground
reservoir with exacting precision, exponentially exposing the face of
the reservoir rock to the wellbore, has created massive efficiencies in
our ability to produce oil and gas. Combined with the ability to
hydraulically fracture the source rock at intervals along the
horizontal lateral wellbore, America's producers are using advanced
technologies to reset the clock on available domestic oil and natural
gas resources.
Ohio is now beginning a new era of oil and gas exploration made
possible by a triumph of technology that is the key to unlocking
reservoirs that until now were not accessible. Along with horizontal
drilling there has been a significant shift in our thinking about where
to find oil and gas. For our entire history we explored for oil and gas
in reservoirs where it had been ``trapped'' after migrating over the
eons from ``source'' rocks where the oil and gas had been formed and
cooked in nature's kitchen. Now, we are drilling into the actual source
rocks where most geologists believe 95% of the oil and gas still
remains in place even after feeding the traps that have produced all of
the oil and gas that we have found to date. This is a radical departure
for industry from the traditional approach to oil and gas exploration.
It is a radical departure from America's understanding of recent years
regarding energy dependency and the availability of reliable and
efficient energy. For Ohio, the result will be the development of vast
new supplies of dependable energy and the creation of a multitude of
jobs in the oil and gas sector as well as other business sectors that
are counting on this resource to expand authentic economic opportunity.
In Ohio the Upper Ordovician Utica/Point Pleasant Shale (Utica) is
the source rock for much of the oil and gas that has been produced in
various conventional reservoir traps. The Utica is the newest member of
the resource shale play that is revolutionizing oil and gas production
in the United States.
Economic Impact: Already production from the resource shales has
fundamentally changed domestic energy markets. Generally it takes 6 Mcf
(thousand cubic feet) of natural gas to equal the energy found in one
barrel of oil. So, over time and absent disruptive events natural gas
has traded at about a 6:1 ratio to crude oil. That is until now. Today
crude oil is trading at $105.00 per barrel. The historic trend says
that natural gas should be priced at about $17.50 per Mcf. However
natural gas is trading at $2.60 per Mcf or nearly 40:1. The new and
efficient development of natural gas from the resource shale plays is
providing the American consumer an incredible energy bargain providing
a fuel priced at 15 percent of its intrinsic energy value, a trend that
the marketplace indicates will continue into the future. It is also
enticing the chemical industry to reenter the United States and build
new chemical manufacturing facilities because they will have access to
a super-competitive and plentiful feedstock, jump starting the job
growth potential downstream of the wellhead
What does this mean for Ohio? Since 1860, Ohio has produced over
8.5 trillion cubic feet of natural gas and 1.14 billion barrels of
crude oil. During recent history, the state's proven reserves have
fluctuated annually at 40-50 million barrels of oil and 800 Bcf to1
trillion cubic feet of natural gas. Each year those reserves have
produced approximately 5 million barrels of crude oil and 85 billion
cubic feet of natural gas, operated by a small but vibrant production
industry that has supported approximately 12,900 direct and allied
jobs.
During 2009 through 2010, intense interest in the Utica Shale began
to ramp up. This has led to a state-wide lease play and exploratory
drilling. The State's Geologist recently provided a volumetric
calculation to estimate the recoverable reserve potential of the Utica
Shale/Point Pleasant interval.\1\ He reported that should producers,
using new technologies, extract 5 percent of the oil and gas in place,
leaving 95 percent of the resource in the rock, the Utica would
generate 15.7 trillion cubic feet of natural gas and 5.5 billion
barrels of crude oil. That is an astonishing number and an enormous,
perhaps ``once in a lifetime'', opportunity for Ohio.
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\1\ Shale Formations and Their Potential; Larry Wickstrom, R. A.
Riley, M. T. Baranoski, C.J. Perry, and M.S. Erenpreiss; Ohio
Department of Natural Resources, Division of Geological Survey; October
2011, www.OhioGeology.com
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On September 20, 2011 the Ohio Oil and Gas Energy Education Program
released a study they had commissioned describing the economic impact
of the existing Ohio exploration and production industry and the impact
the resource shale play will have on Ohio.\2\ The study was based on
similar development in the neighboring Marcellus Shale play. In regard
to Utica Shale development the study concluded the following:
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\2\ Ohio's Natural Gas and Crude Oil Exploration and Production
Industry and the Emerging Utica Gas Formation, Economic Impact Study;
Kleinhenz & Associates, Ohio Oil and Gas Energy Education Program;
September 2011 www.oogeep.org
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Ohio's natural gas and crude oil industry's will
reinvest approximately $246 million on new exploration and
development in 2011, and is estimated to ramp up to $14 billion
by 2015. Over the next five years, oil and gas producers are
projected to reinvest over $34 billion in exploration and
development, midstream, royalty and lease expenditures.
Ohio's natural gas and crude oil industry, via its
expenditures, could generate approximately $12.3 billion to the
gross state product and have a statewide output or sales of $23
billion.
Ohio's natural gas and crude oil operators
(producers) could distribute more than $1.6 billion in royalty
payments to local landowners, schools, businesses and
communities based on an estimate of 2,837 new Utica wells
drilled and completed (in production) between 2011 and 2015.
This could exceed the total amount of royalties paid for all
geological formations between 2000 and 2010.
Between 2011 and 2015, Ohio's natural gas and crude
oil industry will help create and support more than 204,520
jobs due to the leasing, royalties, exploration, drilling,
production and pipeline construction activities for the Utica
Shale within Ohio. Industry wages are projected to grow to more
than $12 billion in annual salaries and personal income to
Ohioans by 2015.
Coupled with the readily available and affordable energy resource,
the expansion of job growth suggests that development of the Utica
Shale may be the most significant positive economic event to take place
in Ohio for decades to come.
Regulatory Policy: The principal regulatory authorities managing
the environmental risks associated with oil and natural gas production
are state agencies acting under state law or as the delegated regulator
under federal law. To put the regulatory process in context, it is
useful to understand some key elements of developing a well and
generating production.
Except on federally owned resources, the regulatory responsibility
rests with the state oil and natural gas agencies for permitting well
construction and completion. These agencies set the standards that must
be met in drilling a well such as location limits, construction
standards (including steel casing and cementing requirements) and
surface management requirements. Well construction requirements are
particularly significant because they are the principal methods of
protecting against ground water contamination. By creating a barrier
between ground water and the wellbore, oil and other chemicals from the
well cannot move into water formations--and water cannot move into the
wellbore. This technological approach has been used effectively for 75
years and is continually improved. Well completion regulations
determine the management of technologies to stimulate production from
oil and natural gas containing formations. Hydraulic fracturing is a
well stimulation technology. Consequently, since its invention in the
late 1940's, its use has been regulated by state oil and natural gas
agencies. Throughout the past six decades this regulatory structure has
effectively protected against the environmental risks of fracturing
without the involvement or intervention of the federal government.
Proposals that the federal government needs to insert itself into well
construction and completion regulation fail to show that any
justification exists suggesting a failure of the current state based
regulatory system or that the federal government has either the
expertise or the capacity to regulate the 35,000 or more wells drilled
annually in the United States.
In fact, where the federal government does have regulatory
authority related to oil and natural gas production, it relies on the
state regulators to conduct the daily regulation efforts. Federal
environmental laws apply to oil and natural gas production activities
when waste is generated. Most specifically with regard to the
development of emerging shale gas and shale oil formations, the
applicable federal laws address the disposal of produced water
(including hydraulic fracturing flowback water)--the Safe Drinking
Water Act and the Clean Water Act (CWA). The applicability of the law
depends on the disposition of the produced water. Produced water
injected underground is regulated under the SDWA; produced water
discharged to the surface is regulated under the CWA. The SDWA and the
CWA operate similarly. The federal government creates a national
framework but the laws rely on state regulators to bear the larger
permitting burden through the delegation of that role from the
Environmental Protection Agency (U.S. EPA).
With respect to the SDWA, regulation of underground injection is
defined by the Underground Injection Control (UIC) program. The UIC
program creates a series of Classes for different types of injection
wells; Class II applies to oil and natural gas production. In 1980,
Congress modified the SDWA to allow for primacy under the law to be
granted to states for Class II programs based on equivalent
effectiveness rather than adoption of the specific EPA regulations.
Most oil and natural gas producing states with active underground
injection operations have primacy based on equivalency with or more
stringent than the federal program. Class II wells can either be used
for disposition of water or for reinjection into formations as a type
of secondary recovery to increase production. Only water produced from
oil and gas wells can be injected into a Class II well. Nothing else.
And, if something was, that would be a violation of the federal SDWA
and Resource Conservation and Recovery Act (RCRA).
According to EPA, the use of injection wells was documented as
early as 300 A.D. and large-scale commercial use of injection wells in
the U.S. began in the 1930s. The oil and gas industry isn't the only
industry that has used injection wells as a safe and well-regulated
disposal means. Other industrial sectors that rely on injection wells
include: chemicals, manufacturing, food and agriculture, plastics and
metal/steel. Ohio is home to 10 so-called Class I wells (industrial
wastes) that accept concentrated high-toxicity wastes generated by
industrial processes. Ohio hosts 58 Class III disposal wells that
accept fluids used to dissolve and extract minerals such as uranium,
salt, copper, and sulfur.
Today, there over 144,000 Class II UIC wells operating within the
United States. On average, those wells accept more than 2 billion
gallons of water per day that is associated with oil and natural gas
development. Clearly, without the delegation of this program to the
state regulatory bodies, the federal law would be virtually incapable
of implementation.
In 1983, U.S. EPA delegated primacy authority to Ohio to run the
UIC program. As the host of the oil and gas regulatory program, the
Ohio Department of Natural Resources received the authority to manage
the Class II program. Under the primacy agreement the ODNR issues UIC
permits for Class II wells, but U.S. EPA set the standards for
construction, maintenance and continuous monitoring of the Class II
wells. \3\ The Ohio UIC program is regularly audited by U.S. EPA and
has undergone peer reviews conducted by the Ground Water Protection
Council.
---------------------------------------------------------------------------
\3\ Technical Program Overview: Underground Injection Control
Program; United States Environmental Protection Agency; Office of Water
4606 EPA 816-R-02-025; revised July 2001
---------------------------------------------------------------------------
Except for a minor amount used by local governments for dust and
ice control, it is the law of the State of Ohio that oil and gas
related produced water must be disposed of using a Class II UIC well
constructed to the federal standards. Industry has constructed a
network of Class II wells along the breadth of eastern Ohio to service
the needs of oil and gas producers who must comply with Ohio law.
Currently there are 181 Class II injections wells operating in Ohio or
0.12 percent of nation's total population of such wells. The Ohio wells
accept about 1.03 million gallons of produced water per day, or less
than 0.05 percent of the total nationwide volume
Opponents of oil and gas development have stated that the industry
is exempt from federal regulation. Again, this is an attempt to
politicize the process. In regard to this, recall that the Safe
Drinking Water Act sets standards for public water supplies including
establishment of the Underground Injection Control Program, a process
that has the specific purpose to permanently dispose by impoundment of
a waste in an appropriate underground reservoir.
Hydraulic fracturing is a well completion procedure designed to
induce permeability in a low-perm oil and gas reservoir by creating a
fracture--a pathway--through the targeted reservoir rock to more
readily allow the oil and gas to move through the reservoir and into
the wellbore to then be lifted to the surface. With few exceptions, it
is a one-time procedure. It is never an ongoing procedure (like Class I
or II injection). It is not the disposal of a waste stream. In fact, it
is done to make a well capable of production in order to efficiently
withdraw in commercial quantities product from the rock, including the
water that was used during the frac job.
There have been anti-oil and gas organizations that have attempted
to construct an argument that fracturing is the same thing as Class II
injection of produced waters and should be regulated as such under
SDWA. That argument is an attempt to fit a square peg in a round hole
and it fails by virtue of the various definitions of the processes
being discussed.
Congress never had the intention of regulating a well stimulation
process under the SDWA as a waste disposal process. In 2005 Congress
clarified that view by stating very simply in the 2005 Energy Policy
Act that hydraulic fracturing--or storage gas injection for that
matter--is not underground injection. Congress did not exempt the
industry from the SDWA as others claim. In fact, industry's produced
waters waste streams are specifically regulated as Class II injection
and fully covered under SDWA federal regulation. There is no
``loophole''. The language is definitional and straight forward.
Nowhere does it say that the oil and gas industry and its activities
that are relevant to the Act are exempted from SDWA regulation.
Corroboration of State-Based Regulation: The operation of oil and
natural gas wells has been regulated since the 1920's with an
increasing emphasis on environmental controls since the 1960's. This
regulation has been and continues to be done effectively by the
states--a reality that has been recognized by the Congress and by the
EPA. Because of the diversity of conditions associated with oil and
natural gas production, the regulatory process must be flexible and
reflect the unique conditions in a state or areas within a state. It
requires the technical expertise that has been developed in each state
and which does not exist within the EPA. For this reason federal law
has generally deferred to the states for the regulation of this
industry.
GWPC: The Ground Water Protection Council (GWPC) is an organization
of state ground water regulatory agencies which come together to
mutually work toward the protection of the nation's ground water
supplies. The purpose of the GWPC is to promote and ensure the use of
best management practices and fair but effective laws regarding
comprehensive ground water protection.
During August 2011, the GWPC issued a report that investigated the
regulatory history of Texas and Ohio as it relates to oil and gas
production and protection of groundwater resources.\4\ The report
conclusively demonstrates that the state regulatory agencies within
these states, both significant oil and gas producing states, have
prioritized regulatory reforms and strategically applied resources to
improve standards that reduce risk associated with state-specific
compliance issues. Over time, both Ohio and Texas have strategically
enhanced regulatory standards for state-specific oil and gas E&P
activities that have been found to cause groundwater contamination
incidents. In other words, the states have made consistent ongoing
improvements to protect the environment and the public interest that is
tailored to each individual state's characteristics and needs.
---------------------------------------------------------------------------
\4\ ``State Oil and Gas Agency Groundwater Investigations and Their
Role in Advancing Regulatory Reforms,
A Two-State Review: Ohio and Texas'', Scott Kell, Groundwater
Protection Council, August 2011, www.gwpc.org
---------------------------------------------------------------------------
STRONGER: Over time the states have engaged in a process that
corroborates their regulatory abilities, identifies regulatory gaps and
provides a process to close those gaps and improve their respective
regulatory programs. The State Review of Oil and Natural Gas
Environmental Regulation, Inc. (STRONGER) is an independent stakeholder
governing body that manages the state review process.
The overall objective of the State Review Process is to help state
oil and gas regulatory programs improve. The key innovative aspects of
the State Review Process are the teams made up of equal representation
from the environmental community, state regulators, and industry that
come together to conduct an authentic peer review critique of a state's
regulatory program, benchmarking the program against a national set of
guidelines that itemize the critical elements necessary to protect the
public interest and environment.
This process represents a stakeholder-driven collaborative effort
working together to develop a regulatory framework at the state level
that effectively protects the environment while recognizing the unique
historic, geologic, and topographic characteristics of oil and gas
development among the states.
STRONGER recently updated the review guidelines to include a
specific section focusing on hydraulic fracturing. Over the past year
STRONGER has done frac-specific review in six states. In Ohio,
following implementation of new law (Senate Bill 165), STRONGER
conducted a state review specific to hydraulic fracturing. The review
concluded that the Ohio program was overall well managed, professional
and meeting its program objectives.
The Secretary of Energy (USDOE), Advisory Board (SEAB), Shale Gas
Production Subcommittee interim reports \5\ and the recent National
Petroleum Report on Shale Gas \6\ have specifically commended the State
Review Process.
---------------------------------------------------------------------------
\5\ Secretary of Energy Advisory Board, Shale Gas Production
Subcommittee, 90-Day Report; SEAB, August 18, 2011, http://
www.shalegas.energy.gov/
\6\ Prudent Development: Realizing the Potential of Abundant North
American Natural Gas and Oil Resources, National Petroleum Council,
September 15, 2011, http://www.npc.org/
---------------------------------------------------------------------------
The State Review Process demonstrates that the states are the best
and most efficient point to regulate the industry's waste streams. The
process provides for a system of constant improvement and an
opportunity to share and promote new or unique regulatory concepts
among the states, while maintaining the flexibility needed to meet
individual states' needs.
Department of the Interior and Federal Lands: The Department of the
Interior has recently indicated it is in the process of developing
regulations for the use of hydraulic fracturing on federal lands and
tribal lands in trust. Historically and effectively, states have been
the primary regulator for well construction and stimulation techniques
like hydraulic fracturing, and for good reason which I've outlined in
detail. While the proposed regulations have not been formally noticed,
I understand a draft proposal was sent to the Office of Management and
Budget for initial review and separately a draft was released to the
press providing a first glance at what the Department is considering.
Upon review, it is apparent these draft regulations will add
significant costs and burdens to companies operating on federal lands
without any appreciable improvement in environmental protection.
Over the last several years, new rules, policies and administrative
actions have made it more difficult for oil and natural gas producers
to operate on federal and tribal lands. In fact, the American Petroleum
Institute (API) recently issued a report that for Bureau of Land
Management (BLM) lands new oil and natural gas leases were down 44
percent in 2009/2010 compared with the previous year. In addition, the
study also found that permits and new wells drilled on federal lands
were also down by roughly 39 percent over the previous year. This loss
of production not only impacts the federal treasury, but it also hurts
businesses and local communities throughout the region that rely on
``multiple use'' of federal lands as the backbone of their economy. The
Wayne National Forest located in southeastern Ohio is a good example of
this.
The draft BLM regulations proposed for hydraulic fracturing are
more burdensome than those any western state has already implemented.
By requiring a 30 day pre-job approval and forcing operators to submit
a separate application for their hydraulic fracturing operations, the
BLM has established a system that is doomed to fail. The 30 day clock
is also unrealistic and does not recognize the realities of a hydraulic
fracturing job as it is being completed. In addition, the draft
regulations raise a host of questions regarding what will be required
for operators to remain in compliance with the regulations.
The proposed regulations to govern hydraulic fracturing on federal
lands are redundant to what states are already doing to manage any
environmental risk, and doing well according to EPA Administrator Lisa
Jackson, and will only further delay an already slow approval process
for oil and gas operations. At a time when our nation is looking for
ways to increase job creation and economic activity, the proposed
regulations will take us further from that goal and will instead create
further hardship for oil and gas producers and the mineral owners--
American taxpayers--who desire those revenues and economic activity.
______
Tom Stewart serves as the executive vice president of the Ohio Oil
and Gas Association (OOGA), having been elected to that position in
September 1991. At OOGA, Stewart is director of staff; editor of the
Association's publications; an industry spokesman to media outlets and
other forums; and, on behalf of OOGA members' interests, serves as
public policy advocate in Columbus and Washington D.C.
Stewart serves as the Ohio associate representative to the
Interstate Oil and Natural Gas Compact Commission (IOGCC), having been
appointed to that position by Governor George Voinovich in 1997. IOGCC
(http://www.iogcc.state.ok.us/) is an organization of governors of the
oil and natural gas producing states established to promote the
conservation and efficient recovery of domestic oil and natural gas
resources while protecting health, safety and the environment.
Stewart is an active participant with the Independent Petroleum
Association of America (IPAA)(www.ipaa.org) and serves on the IPAA
Environment and Safety Committee, the Communications Steering
Committee, the Gas Pipeline Safety Sub-Committee and is an original
member of the management team organizing the national BRIEF Project.
http://www.energyindepth.org/
In December 2001, Stewart was elected to the Board of the State
Review of Oil and Natural Gas Environmental Regulations, Inc.
(STRONGER) as one of three representatives for the U.S. oil and gas
exploration and production industry. During 2003, Stewart served as
chairman of the STRONGER Board. He currently serves as vice-chair of
the organization. STRONGER is a non-profit organization created to
administer and advance the state review process of the States' oil and
gas exploration and production waste management regulatory programs.
STRONGER is a stakeholder-driven process with equal representation from
government, industry and the environmental community. STRONGER's
objective is to foster constant improvements in state oil and gas
regulatory programs in order to protect human health, safety and the
environment. http://www.strongerinc.org/
From August 2002 to November 2005, Stewart served as the secretary
treasurer of the Liaison Committee of Cooperating Oil and Gas
Associations. The Liaison is a national network organization of state
and regional trade associations that represent the independent oil and
gas exploration and production industry in the United States. Stewart
was responsible for coordinating the organization's efforts.
Prior to joining OOGA, Mr. Stewart has fifteen years of formal
experience in the oil and gas industry as an oil and gas producer and
provider of contract drilling services. He is the third generation of
his family to engage in exploration, development and production of
crude oil and natural gas.
The Ohio Oil & Gas Association is a statewide trade association
with over 1,900 members who are actively involved in the exploration,
development and production of crude oil and natural gas within the
State of Ohio. Since 1947, the Association's mission is to protect,
promote, foster and advance the common interests of those engaged in
all aspects of the Ohio crude oil and natural gas exploration and
production industry.
______
Mr. Lamborn. OK. Thank you.
[Disturbance in hearing room.]
Mr. Lamborn. I will ask you to respect everyone's rights.
[Disturbance in hearing room.]
Mr. Lamborn. Please try to respect everyone's rights.
[Disturbance in hearing room.]
Mr. Lamborn. Please respect everyone's rights.
[Disturbance in hearing room.]
Mr. Lamborn. This gentleman here in the blue. In the next
row behind they were loud also.
[Disturbance in hearing room.]
Mr. Lamborn. Please respect everyone's rights. This lady
here is disrupting also.
[Disturbance in hearing room.]
Mr. Lamborn. Does anyone else want to leave or be
disruptive? I would ask everyone to respect the people's rights
who are here, who are testifying, the diversity of views that
will be testifying.
Ms. Papai. Thank you.
Mr. Lamborn. I think they all deserve to be heard. So I
would ask each member of the audience to respect the right of
the witnesses and the rest of the public who are here that want
to hear the witnesses.
We will now continue with Mr. Taylor who represents Local
396.
Mr. Taylor?
STATEMENT OF ROLAND BUTCH TAYLOR, BUSINESS MANAGER, PLUMBERS &
PIPEFITTERS LOCAL 396
Mr. Taylor. Thank you, Chairman Lamborn. Members of the
Subcommittee on Energy and Mineral Resources, thank you for the
opportunity to appear here today to discuss natural gas,
America's new energy and creation of jobs and growth in the
community, especially in the Mahoning Valley.
My testimony today here will focus on the economic
recovery, not on my organization of the Plumbers and
Pipefitters, but many organizations as well as businesses in
the industry in and outside of shale. There have been numbers
of opportunities and benefits from partnerships that have been
formed.
Road to economic recovery. As reported in the regional
chambers, the economic engine of the Youngstown-Warren region
known as the Mahoning Valley was revving up in recent years.
Since 2008 economic development project announcements have
resulted of an impressive $1.5 billion investment. That is
5,098 new jobs, 7,840 either maintained or retained jobs. The
shale industry development boom that is coming into Ohio is
bringing industrial cities, such as Youngstown, Warren, Salem,
East Liverpool, Wellsville and Steubenville back to life. These
projects that our organization has been part of includes V&M
Star, the leading producer of seamless mill and tubular goods
for the oil and gas industry, has started construction in
Youngstown in the new $650 million, 1 million square foot
seamless tubular production mill. It has created over 1,500
construction workers' jobs and over 300 from my organization,
United Association. In advance of that is 350 plant jobs in
advanced manufacturing plus more phases are to come, such as a
finishing mill, water treatment plant and many more.
V&M Star's sister company VAM-USA is a manufacturer of
premium pipe connections used in the shale drilling process.
This will consist of a 200,000-square foot finishing plant at a
cost of $57 million and will employ 200 construction workers
and over 100 new manufacturing jobs.
Universal Stainless in North Jackson, Ohio, has a 200,000-
square foot building with a cost of $100 million, manufacturing
in aerospace and oil and gas production, and it also includes
200 construction workers, 100 new plant jobs. It was completed
in 2010 but still is adding on and expanding.
Patriot Waters has built a state-of-the-art fracking water
treatment facility in Warren, Ohio which created 43 jobs. More
of these types of facilities are being built around the area.
These are a small part of many of the projects that are
developing in Mahoning Valley, like General Motors Lordstown,
R.G. Steel, RTI Metals, as well as commercial growth in the
hospitals and schools. For example, Youngstown State University
has announced plans for a Natural Gas Water Resource Institute
to better prepare its students for jobs related in Utica shale.
Eastern Gateway Community College has remodeled two facilities
in the Youngstown-Warren area for training in such positions
within the building trades or jobs in the community.
I would like to finish my economic recovery by talking
about two companies that have relocated into the area and that
Local 396 has agreements with for pipe fabrication and
components in industrial projects, and they do work both
nationwide as well as outside this country.
First is De-Cal Mechanical. It is a pipe corporation, pipe
fabrication plant, and it has relocated a branch from Detroit,
Michigan into the Youngstown, Ohio area. The Youngstown offices
opened in 2011 by purchasing a 16,000-square foot building near
the V&M Star project. In less than 1 year, they are expanding
their fab shop operations by 46,000 square feet and increasing
their employment, employees, members of my local, from 40 to
130. This partnership was formed by both government, local and
Federal, regional chambers, management as well as labor working
close together to make this happen.
Evets Oil and Gas, V.E.C. Incorporated, is a mechanical
company that has been involved in Marcellus shale on the
electrical side. The company has expanded to offer their
turnkey operations to gas corporations and has worked
nationwide, has 200 compressors built, $2 million fab shop in
Girard, Ohio, and they have a strong reputation in quality
work.
I can see my time is getting close, so I am going to jump
over to some of the things that are important in my statement.
Natural gas holds in Ohio a very, very strong future in Local
396 both with its contractors and business. The manpower is so
great we increased our apprenticeship program as well as our
welder certifications. Our plan is to add more metal trades
into the fab shop and helpers into the oil and gas. With this
expansion, we have been able to recruit numbers of young people
that are interested in this career, displaced workers and
Veterans overseas. Part of the program is the VIP, which is
known as UA Veterans In Piping.
Our general president, Bill Hite, has started a partnership
with the military, and with this there is 16 weeks accelerated
class, 2 weeks of transition into the civilian life. By this
project alone there has been over a thousand military officers/
military into the construction business.
My closing is to thank Chairman Lamborn for the opportunity
to provide this Subcommittee with the achievements and
opportunities that Plumbers & Pipefitters have experienced.
There have been a few elected officers/officials that have
wanted to put a moratorium on this industry. I feel this would
be a travesty, especially concerning the growth that we have
experienced over the years, and the drilling process has not
really started in Ohio.
One of my members from Local 396 was asking how I am
handling the headaches of the demands of the work picture. My
reply to him was, ``I would rather deal with the headaches than
the heartaches that I have experienced over the last 2 years
when there were no opportunities.''
I welcome this Committee and very well appreciate it, much
appreciate it for being able to appear in front of you. Again,
I want to thank you. I skipped over a couple of things because
I know my time was limited, but I wanted to thank you both,
Congressman Bill Johnson and Tim Ryan, for their support, not
only for opportunities to get grant money for our Veterans to
get into this workplace, but also the symposium for the Utica
shale in order to draw people to Ohio. Thank you.
[The prepared statement of Mr. Taylor follows:]
Statement of Roland ``Butch'' Taylor, Jr., Business Manager,
United Association of Plumbers & Pipefitters Local 396
Chairman Lamborn and members of the subcommittee on Energy and
Mineral Resources: Thank you for this opportunity to appear here today
to discuss with you Natural gas--America's new energy, and the creation
of jobs and the growth of our community in the Mahoning Valley. My
testimony today will focus on the economic recovery, not only in my
organization of the Plumbers & Pipefitters, but other organizations, as
well as all businesses in the industry and outside of the Shale
industry. All have had numerous opportunities to benefit from the
partnerships that have been formed.
Road to Economic Recovery:
As reported by the Regional Chamber, the economic engine of the
Youngstown-Warren region known as the Mahoning Valley has been ``revved
up'' in recent years. Since 2008 economic development project
announcements have resulted in an impressive $1.5 billion investments,
5,098 new jobs and 7,840 maintained/retained jobs.
The Shale gas development boom that is coming into Ohio is bringing
industrial cities in the region, such as Youngstown, Warren, Salem,
East Liverpool, Wellsville, and Steubenville back to life. Projects
that our organization have been part of include:
1. V&M Star, the leading producer of seamless pipe and tubular
goods in the oil and gas industry. They have started construction in
Youngstown on a new $650 million, one-million square foot seamless
tubular product mills. It has created over 1500 construction workers
jobs (over 300 from the United Association) and 350 plant jobs in
advanced manufacturing. Plus more phases are to come, such as a
finishing mill, water treatment plant, and many more.
2. V&M Star sister company VAM-USA, a manufacturer of premium pipe
connections used in the Shale drilling process, will build a 200,000
square-foot finishing plant at a cost of $57 million and employing 200
construction workers, with over 100 new jobs in manufacturing.
3. Universal Stainless in North Jackson, Ohio. A 200,000 square-
foot building with a cost of $100 million dollars. Manufacturing in
aerospace and oil and gas production. 200 construction workers, 100 new
plant jobs. This was completed in 2010, it has since been added on to
and expanding.
4. Patriot Waters built a state-of-the-art fracking water
treatment facility in the city of Warren, creating 43 jobs. Plus more
of these types of facilities are to be built in the area.
These are a small part of the many projects that are developing in
the Mahoning Valley, like GM Lordstown, R.G. Steel, RTI Metals, as well
as commercial growth in hospitals and schools. For example, Youngstown
State University announced plans for a Natural Gas Water Resource
Institute to better prepare its students for jobs related to Utica
Shale. Also, Eastern Gateway Community College has remodeled two
facilities in the Youngstown-Warren area for training into such
positions as the Building Trades and jobs in the community.
I would like to finish with Economic Recovery by talking about two
companies who have relocated to our area, that Local Union 396 has
Agreements with to fabricate pipe and components for Industrial
projects nationwide and even outside the country.
1. De-Cal is a mechanical contractor and pipe fabrication plant
who relocated a branch office from Detroit, Michigan to Youngstown,
Ohio. The Youngstown offices opened August 2011 by purchasing a 16,000
square foot building near the V&M Star Company and in less than one
year plans to expand its fab shop operation by 46,000 square feet and
increase their employees/our members from 40 to 130. This is a
partnership of both government--local and federal, Regional Chamber,
management and labor who work very closely to make this happen.
2. Evets Oil and Gas, V.E.C., Inc. is a new company in the
mechanical field, but has been involved with the Shale Industry under
the electrical side. The company is expanding to offer turn-key
opportunities. Work would expand in the gas compressor station. This
company travels nationwide and has installed more than 200 compression
stations and plans to build a 2 million dollar fab shop in Girard,
Ohio. They have a strong reputation for quality work.
Because of the gas industry and the VM Star project, our 52
signatory contractors, such as Roth Bros, Prout Boiler, Western Reserve
Mechanical and McCarls, employ over 400 of our members, working in all
facets such as the new shale oil, industrial, light commercial and
residential. Local Union 396 is very proud to support them and have a
great labor-management relationship.
Training:
Natural gas holds promise for the future of Ohio and the future for
Local Union 396 signatory contractors and businesses in our area. The
manpower needs will be so great that we have increased our
apprenticeship program, as well as our welder certification programs.
Our plans are to add to such support groups as Metal Trades so that
they will be utilized into the Fab shops, and Helpers to be utilized
into the oil and gas industry. Both Metal Trades and Helpers will be
used in a pre-apprenticeship program for future students of the piping
industry. This is where we can start recruiting individuals that are
young students looking for a career, as well as displaced workers and
veterans coming from overseas back into the workforce.
By expanding our training programs, we are going to utilize some of
the programs that have been set up for us by the United Association,
such as the UA Veterans in Piping (VIP). Our General President of the
United Association, Bill Hite, has created this program to include a
partnership with the US military. The VIP Program provides retired vets
with 16 weeks of accelerated welding training. But before that career-
training begins, they kick-off the program with an additional two weeks
of transitional training to help returning veterans adjust to civilian
life. The training is free to veterans who are placed in construction
careers nationwide. Over 1,000 veterans are already on the job. General
President Hite received distinguished service awards from the Military
Officers Association of America.
Another program we have enforced: Pathway through the Building
Trades, Education and Opportunity to Employment. This will also seek
out and address the minorities and women in well-paid jobs and careers,
upgrading their skills in order to achieve their academic goals both in
training and the apprenticeship programs in the building trades.
We have been able to apply for grants in order to recruit welders,
such as the downhill program. Our goal is that this program will expand
into having proficient welders in the oil and gas industry. I would
like to thank both Congressmen Bill Johnson and Tim Ryan for their
support in this program.
Our Local went from close to 40% unemployment two years ago, to
full employment, with over 440 traveling members from the United
Association from all over the country working in our jurisdiction at
one time. And no lay-offs are in the future.
Partnerships:
The working relationships that we have in the Mahoning Valley are a
big part of the success and the great opportunities that we have now.
Our organization of Plumbers and Pipefitters Local 396 works very
closely with the Regional Chamber and the Columbiana County/Wellsville
Chamber, so close in fact that labor leaders from the Building Trades
have a position on the Board of Directors at the Chamber. We have
worked to build a positive relationship with bipartisan elected
officials in order to build trust and work together as a team, with one
goal: to improve the community that we live in.
With the support of both Congressman Bill Johnson and Tim Ryan, we
have put together a Symposium Meeting for the oil and gas industry
(Utica Shale Drilling). It will bring together companies of the oil and
gas industry, piping contractors that have true expertise in their
fields, Tech Belt/Energy companies, Community Colleges, and State
Colleges. Businesses that are affiliated, the Regional Chamber of
Commerce, and Labor, including Local 396, will work together to play a
key role in the Shale development.
In closing, thank you, Chairman Lamborn, for the opportunity to
provide the subcommittee with the achievements and opportunities that
Plumbers & Pipefitters Local 396 have experienced. There have been a
few elected officials wanting to place a moratorium on this industry. I
feel that this would be a travesty, especially considering the growth
that we have experienced already, and the drilling process has not even
started yet. I have had a member of Local 396 ask me how I am handling
the headaches of all the demands with the work picture. My reply to him
was, I would rather handle the headaches than the heartaches that we
have experienced these past few years, when there were no
opportunities. Again I would like to thank the committee for my
appearance here. It has been overwhelming and much appreciated. If
there are any questions I would be pleased to take them at this time.
______
Mr. Lamborn. Thank you, Mr. Taylor, so much.
Mr. Pounds?
STATEMENT OF JACK POUNDS, PRESIDENT,
OHIO CHEMISTRY TECHNOLOGY COUNCIL
Mr. Pounds. Thank you, Mr. Chairman, Members of the
Subcommittee.
I am Jack Pounds. I am President of the Ohio Chemistry
Technology Council. We are a trade association for the chemical
industry in Ohio which has historically been really the
foundation for the major part of manufacturing activities in
the state. The value of chemicals produced in Ohio each year is
approximately $28 billion, and about 20 percent of that is sold
to customers outside of the United States. So we are an
important player in the global economy.
Unfortunately the chemical industry in Ohio and in the
United States as a whole has been in a state of slow to no
growth for much of the past decade. This reflects really two
things: First, the recession or near-recession conditions in
the largest markets for products of chemistry and, second, the
advantage that chemical companies outside the United States
have over our companies here in terms of feedstock costs and
energy costs.
The basic feedstocks that are purchased and further
processed by the chemical industry around the world are
primarily derived either from oil or from natural gas. In the
United States, unlike Europe, the chemical industry feedstocks
primarily come from natural gas. About 80 percent of them in
the United States are from natural gas.
In recent years natural gas prices have fluctuated
dramatically as you well know, rising from under $2 per million
British Thermal Unit back in the late 1990s to over $13 per
million BTUs in the early to mid-2000s, and they continue to be
very volatile. Yes, they are down today, but it is still a very
volatile commodity.
For our chemical companies in Ohio, unpredictable natural
gas supply and pricing coupled with recession in the major
markets for our chemicals have stifled new investment and job
creation in an industry that is the foundation for almost all
manufacturing. That is a technology resource that is vital to
our country for its long-term viability and our national
security.
I should also note that purchased energy costs are an
important consideration to our chemical industry. We are a
major energy user, and right now in Ohio, as you well know,
more than 80 percent of our electricity is generated from coal.
That resource is in question and at some point, natural gas may
be the resource that has to take its place. As recently as two
years ago, no one in our industry in Ohio saw any magic bullet
solution to the dual challenges that our industry faced of high
and unpredictable costs of raw materials and the same with
purchased electricity.
Now with the emergence of Ohio's vast shale gas reserves
onto the scene, it is my belief that Ohio's chemical industry
is about to experience a renaissance. I say this because
sensible, responsible development of the shales will make
Ohio's chemical industry competitive with companies in any
region in the world except Saudi Arabia and Canada.
That is because the shale gas can provide, first, lower
feedstock costs that our chemical companies will use those
feedstocks to create innovative high technology content
products for sophisticated customers around the world, and
second, a long-term supply of natural gas that can fuel utility
boilers that generate low cost electricity.
The feedstock benefit reflects the fact that much of Ohio's
shale formations contain high levels of wet gases which are
fractioned, such as ethane, butane and propane. These fractions
are the critical feedstocks for the chemical industry today,
and when they are processed through a fracking facility will
yield basic chemicals, most importantly ethylene from methane.
If I could refer the Committee to the chart that we have
here, in the upper left-hand corner it shows how we start the
ethylene chain. And ethylene is really the most critical
chemical raw material. You have the natural gas well, the wet
gas fraction. Ethane is separated from that at the central
fracking facility. We soon hope to have one of those located in
this region. And then from the fracker it goes to the other
chemical plants, and those chemical plants will make things
like polyvinyl chloride, vinyl chloride, ethylene glycol,
styrene, polyethylene, polypropylene, and those are the
materials that really then are sold to other companies.
We have about 2,500 companies in the plastics and polymers
industries in Ohio that take those materials and make every
sort of consumer, medical device that you can imagine, lots of
coatings for appliances, cars, that sort of thing, and those
things are sold to customers around the world. So Ohio is a
huge player in that marketplace in the world today. This is
going to position our chemical industry to provide basic
feedstocks to so many other different industries.
Last year the American Chemistry Council Economics Division
published an economic study, which the Committee has in its
possession, that concludes that a new cracker facility in this
region with the capacity to create 1 million metric tons of
ethylene from ethane each year could trigger construction of
new chemical production facilities in Ohio that would add $4.8
billion in additional chemical production value, about 17
percent increase in the production from chemicals in Ohio;
would lead to the direct, indirect and induced creation of
17,000 new jobs, $600 million in new payrolls; and provide our
existing 2,500 polymers/plastics businesses in the state with a
reliable, competitive and close-by supply of the ethylene
derivatives that they use in their business.
Mr. Chairman, as a native of this part of the state, it
would seem our young people generation after generation move
away to find opportunities to make a life for themselves
elsewhere. I have a strong personal interest in seeing things
change here. The opportunities for Ohioans to benefit from
sensible development of our shale resources represents a once
in a lifetime opportunity. I would urge the Congress to look
upon this as an exciting first step in making our state, this
part of the state and our people here players in the global
economy with a standard of living that benefits a people that
deserve it, who have a great work ethic here.
I thank you again for the opportunity to be here this
morning.
[The prepared statement of Mr. Pounds follows:]
Statement of Jack R. Pounds, President,
Ohio Chemistry Technology Council
Good morning, Mr. Chairman:
My name is Jack Pounds, and I am president of the Ohio Chemistry
Technology Council, the non-profit association for the chemical
industry in the state of Ohio. The chemical industry in Ohio has always
been a major part of the manufacturing-based economy of the state. Our
chemical companies are engaged in the research, development, and
production of highly-sophisticated chemistries that are sold to
customers around the world who use them as the basic building blocks
for the thousands of products that make our modern lifestyles possible.
The value of chemicals produced in Ohio is more than $28 billion
annually, with approximately 20% of those representing sales to
customers outside the United States.
Unfortunately, the chemical industry in Ohio--and in the United
States as a whole--has been in a state of slow to no growth for much of
the past decade. This reflects (1) recession or near-recession
conditions in the largest markets for the products of chemistry, most
notably the auto, construction, and manufacturing sectors of the
economy; and (2) the advantage chemical companies outside the U.S. have
in terms of feed stock and energy costs.
While tax and regulatory policies in this country have also played
a role in the industry's decline, the most significant factor has been
the unpredictability in the costs of chemical feed stocks and purchased
energy.
Feedstock Costs:
The basic feed stocks that are purchased and further processed by
the chemical industry around the world are primarily derived from oil
and natural gas. In the United States, more than 80% of the chemical
industry's feed stocks come from natural gas. In recent years, natural
gas prices have fluctuated dramatically--reaching over $13 per million
British Thermal Units (BTUs) in the early to mid-2000s, and continues
to be very volatile. For our chemical companies in Ohio, unpredictable
natural gas supply and pricing--coupled with recession in major markets
for chemicals--have stifled new investment and job creation in an
industry that is the foundation for almost all manufacturing in the
U.S. and that is a technology resource that is vital to our long-term
economic viability and national security.
Purchased Energy:
The chemical industry is a major energy user, and purchased
electricity is a large component of production costs. The threat that
coal may not be a long-term source of electric power in Ohio has loomed
over the industry for many years, and has a definite impact on where
new investments are located by major chemical companies.
Ohio's Shale Gas Represents a Potential ``Renaissance'' in Ohio's
Chemical Industry:
As recently as two years ago, no one in our industry in Ohio saw
any ``magic bullet'' solution to the dual challenges of high and
unpredictable costs of raw materials and purchased electricity.
Now, with the emergence of Ohio's vast shale gas reserves onto the
scene, it is my belief that Ohio's chemical industry is about to
experience a ``renaissance''. I say this because sensible, responsible
development of the shales will make Ohio's chemical industry
competitive with companies in any region of the world--except for Saudi
Arabia and Canada. That is because the shale gas can provide both (1))
lower cost feed stocks that our chemical companies will use to create
innovative, high-technology content products of chemistry for
sophisticated customers around the world, and (2) a long-term supply of
natural gas to fuel utility boilers to generate low-cost electricity.
The feedstock benefit reflects that much of Ohio's shale formations
contain high levels of ``wet gases'', which are fractions such as
ethane, butane, and propane. These fractions are the critical feed
stocks for the chemical industry today--and when they are processed
through a cracking facility, will yield basic chemicals, most
importantly, ethylene from ethane.
If I may refer to the chart here, a copy of which has been provided
to the subcommittee, I can point out the route from a natural gas well
to ethane collection to a cracker where ethylene is produced to other
major chemicals and then to some examples of the thousands upon
thousands of products that are critical to each of us.
Last year, the American Chemistry Council's Economics Division
published an economic analysis (Shale Gas and Petrochemical Investments
in Ohio--provided to the subcommittee) that concludes that a new
cracker facility in this region with the capacity to create 1 million
metric tons of ethylene from ethane could trigger construction of new
chemical production facilities in Ohio that would:
add $4.8 billion in additional chemical production
(+17%);
lead to the direct, indirect, and induced creation of
17,000 new jobs in Ohio, $600 million in new payrolls, and $170
million in new tax revenues for Ohio governments; and,
provide our existing 2,500 polymers (plastics)
businesses in the state with a reliable, competitive, and close
by supply of the ethylene derivatives they use in their
businesses.
Mr. Chairman, as a native of this part of the state who has seen
generation after generation of our young people move away to find
opportunities to make a better life for themselves, I have a strong
personal interest in seeing things change here. The opportunities for
Ohioans to benefit from sensible development of our shale resources
represent a once in a lifetime opportunity. I would urge the Congress
to look upon this as an exciting first step in making our state, this
part of the state, and our people players in the global economy, with a
standard of living that befits a great people with a great work ethic.
Thank you again for the opportunity to share my excitement with
you.
______
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Mr. Lamborn. OK. Thank you.
We will know hear from Ms. Michelle Papai who sits on the
city council of Athens, Ohio.
STATEMENT OF MICHELE PAPAI,
ATHENS CITY COUNCILPERSON, 3rd WARD, ATHENS, OHIO
Ms. Papai. It is interesting to be on the other side of the
light.
Mr. Lamborn. Are all your meetings as quiet as this one?
Ms. Papai. Oh, I have lived in Athens, Ohio.
[Laughter.]
Ms. Papai. Chairman, Committee Members, thank you for
inviting me to speak.
My name is Michelle Papai, I am a member of Athens City
Council. I am fully engaged with my constituency. In my day job
I also meet regularly with Southeastern Ohio residents from all
socioeconomic backgrounds. I have witnessed a tremendous
groundswell of community concern about shale drilling since
dozens of formal protest letters were submitted to the Bureau
of Land Management last fall requesting withdrawal of gas and
oil lease sales in Wayne National Forest land.
These included letters by the Mayor of Athens, Athens City
Council, Athens County commissioners, water district heads and
the President of Ohio University. President McDavis' letter
states, quote, ``It is our duty to lead and support our campus
and greater community as we seek safe living conditions,
healthy economies and fertile land where we live and work. The
potential December 7, 2011 sale poses a threat to a healthy
living and learning environment at Ohio University,'' end
quote.
Athens City Mayor, Paul Wiehl, wrote, quote, ``Our city's
water supplies, economy, safety and public health will all be
severely harmed by the sales. We will not be able to fulfill
our duty to protect our water supply if these sales go
through,'' unquote.
Over 300 protest hard copy letters and 1,800 signed
petitions and emails were sent to the Wayne. Our concerns are
economic, environmental, ethical. They are about the threats to
our quality of life and to the viability of our community.
Athens City Council and county commissioners have passed
resolutions expressing economic and environmental concerns. The
commissioners call for stricter state and Federal Governmental
regulations. Environmental impacts are documented daily in
other parts of the country. Our city council resolution
references the USEPA Pavilion Studies that document benzene at
50 times safe drinking water levels. Serious fracking
contamination has been found endemic in Pennsylvania as well.
Our aquifer on which 70,000 people depend for drinking
water is shallow, permeable and inextricably linked to the
health of the Hocking River. The Ohio Division of Natural
Resources has not even mapped aquifers in our part of the
state. How can we possibly proceed with deep shale drilling on
the Wayne when this is the only source of water for most of the
residents of Athens County as well as for many residents of
adjacent Morgan County.
The depth of our water table ranges from surface level to
20 feet. Our aquifer averages 60 feet below ground making it
highly susceptible to surface or near surface contamination.
Previous coal mining has left our land riddled with shafts.
Drilling through these will provide pathways for gas and
chemical migration and release acid water assuring corrosion of
wells, casings and eventual well failure.
Athens County is mostly rural and poor. Economic
development is, of course, important to us, but so is the long-
term sustainability of our county. Studies on current shale
plays show that job growth comes to only about ten percent of
industry production, and most jobs are temporary and go out of
state. Our tourism, rural beauty, local food and arts
industries, institutions of higher learning and green
technologies are all incompatible with industrialization of our
countryside and degraded area water.
Two distinctive Athens County institutions, Ohio University
and Hocking College, are central to our economy. Water and/or
air contamination would severely threaten them and, therefore,
our region's economy. What parent would want to send their
child to an industrialized zone with highly polluted air and
contaminated water? That is why students come to Ohio
University from the North.
We are concerned about property values, not only of leased
land, but also nearby properties. Real estate agents have
spoken with me about sales lost due to lack of buyer's ability
to protect their land. Insurance agents are receiving calls
from homeowners discussing their property is unprotected
because industrial operations nullify contracts. The FHA will
not provide a mortgage for property with a drill site. Neither
will HUD. These are devastating economic impacts that we fear
will become widespread.
Ohio's Attorney General has stated his concerns about
dishonest practices, inadequate regulation and chemical
disclosure. Documented examples exist of landsmen in Athens
County making false statements such as, quote, ``Only fresh
water,'' unquote, is injected into their gas wells.
I have spoken with many citizens who feel that they have
leased under duress. They say, ``I have a small amount of
acreage, and they will take it anyway,'' quote-unquote, or,
quote, ``my neighbors have signed, so I signed a nonsurface
lease so I will have the resources to leave,'' unquote.
Other hard working taxpayers who have not signed have
stated they will leave if drilling occurs on neighbor's
property because they will not tolerate resulting air
pollution, potential water contamination, high levels of truck
traffic, noise and light pollution.
Ohio Representative Sutton isn't here--Johnson and the rest
of the Committee, as national leaders and policymakers, I urge
you to make a stand now. These issues demand close scrutiny,
rigorous regulation and a reasonable systemic approach. I ask
that a full National Environmental Policy Act analysis be
required at Bureau of Land Management's request for hydraulic
fracturing in the Wayne National Forest, Athens County, Ohio.
Please hear the voice of the people that elected you and
help us. There is too much at risk for our Appalachian
communities. We must take the safest paths possible. As a local
official my hands are tied with the State of Ohio. They have
the control. ODNR has all the control.
Thank you.
[The prepared statement of Ms. Papai follows:]
Statement of Michele M. Papa, Athens City Councilperson, 3rd Ward
Committee Members, thank you for allowing me to speak today.
I am here as an elected official for the City of Athens, located in
Athens, Ohio and home to the main campus of Ohio University. Our city's
population is about 24,000 with university enrollment of about 20,000.
The county of Athens has a population of about 65,000 with 506 sq.
miles. Almost 78% of that area is forested.
You may be wondering, why am I speaking today? In October, our
community quickly rallied and responded to the notification of pending
lease sales of over 3200 acres of Wayne National Forest land for gas
and oil drilling, which could include deep shale drilling and high
volume horizontal hydraulic fracturing. The Athens City Council sent a
formal letter asking that the BLM halt the sales, stating, ``Athens
City Council, Athens City, Ohio is a statutory city that relies upon a
riparian aquifer as the sole source for its municipal water system. .
.We are concerned that the leasing, drilling, and operation of the
potential wells in the Utica Shale will have a deleterious effect on
our sole source municipal water supply. It must be noted that we have a
meager water supply in general in unglaciated Ohio, and our water
source is inextricably bound to the health of the Hocking River (http:/
/ohioline.osu.edu/aex-fact/0480_05.html). We are also concerned that
the leasing and drilling of these parcels could negatively impact
wildlife, habitat, and human health and recreational enjoyment.'' The
letter concludes, ``We request the withdrawal of the lease sale until
the proper environmental analysis is conducted and our water supply is
protected.''
The BLM also received letters from the President of Ohio
University, Athens County Commissioners, Burr Oak Regional Water
District, Athens City Wellhead Protection Team, the Athens City
administration, and 42 other official bodies and individuals (blm.gov/
es/st/en/prog/minerals/protests_information.html), a record number,
indicating the level of concern and the severity of the threat to our
water supply, economic and public health, and quality of life,.
Athens City administration's letter states,
The City of Athens is filing this action because our city's
sole source riparian aquifer drinking water supplies will be
severely impacted by these sales and because it is our duty by
law to protect our drinking water supply. We are concerned that
the stipulations in your lease do not protect the Hocking River
and the aquifer, on which our City's water supply depend.
The City of Athens has an interest in these sales because our
city's water supply, economy, safety, and public health will
all be severely harmed by the sales. We will not be able to
fulfill our duty to protect our water supply if these sales go
through.
Athens Drinking Water Supply will be severely threatened by this sale
The City of Athens drinking water supply is a sole source
aquifer continuous with the aquifer under and nearby--downhill
and downstream of--the Wayne parcels to be sold. It is also
adjacent to and recharged by the Hocking River, which will be
deleteriously impacted by these sales.
The water table in our well fields ranges from surface level to
20' below the surface throughout the year. The aquifer that
feeds Athens' water supply is shallow, averaging a maximum of
60 feet below ground level. It is therefore especially
susceptible to pollution from surface level and near-surface
level contamination.
AWater withdrawals will threaten our water supply
According to the Atlas of Reported Withdrawals by County for
Athens County, Ohio, the county's public water systems already
use 99% of total withdrawals for public use daily.
Athens City currently draws close to 5 million gallons a day,
which is sometimes close to the capacity of the aquifer to
recharge. Diminished water in the river has historically
resulted in diminished availability in city wells. The city is
already withdrawing close to the total water available per day
on many days of the year.
Significant water withdrawals from the aquifer and/or from the
Hocking River are expected to occur and are currently allowed
by Ohio law for deep shale horizontal hydraulic fracturing.
According to the USEPA, each Marcellus well requires 2-10
million gallons of water per well (Kargbo et al., Natural Gas
Plays in the Marcellus Shale, Environ. Sci. Technol., 2010, 44
(15), pp 5679-5684). Utica wells, often twice as deep,
generally require greater volumes than do Marcellus wells.
AToxic chemicals used in drilling, fracking, and production will
threaten our water supply
Many hundreds of highly toxic chemicals are injected into wells
for deep shale drilling and horizontal fracturing, including
known carcinogens and neurotoxins, at rates of tens of
thousands of gallons per well.\1\ Flowback water and sludge
contain high levels of toxic chemicals, according to EPA
documents published by the New York Times: ``Diesel is not the
only component of fracturing fluid that contains high levels of
BTEX and other toxic materials. Indeed, companies have
disclosed to the authorities in NY and PA that they use other
types of petroleum distillates that contain high levels of
benzene, a human carcinogen that is considered unsafe in
drinking water at levels above five parts per billion, the
equivalent of a few drops in a swimming pool. Some of these
petroleum distillates that the industry uses include kerosene,
mineral spirits, petroleum naphtha and Stoddard solvent.
According to scientific literature, these additives can contain
up to 93 times the amount of benzene contained in diesel.'' \2\
---------------------------------------------------------------------------
\1\ EPA/600/D-11/001/Feb 2011water.epa.gov/type/groundwater/uic/
class2/hydraulicfracturing/index.cfm 19-24
\2\ nytimes.com/interactive/2011/02/27/us/natural-gas-documents-
1.html#document/p391/a9939
EPA testing of brine in the Pennsylvania Brine Treatment--
Franklin plant recorded benzene at 26 times federal drinking
water standards.\3\
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\3\ nytimes.com/interactive/2011/02/27/us/natural-gas-documents-
1.html#document/p416/a9943
Because chemicals used by the gas and oil industry for
drilling, fracturing, and production are exempted from
regulation by the SDWA, Clean Water Act, and RCCRA, these
levels are neither monitored nor reported.
ARadioactivity will threaten our water supply
Flowback waters and sludge can also contain high levels of
radioactivity, according to documents submitted to New York
State and Pennsylvania authorities. One Pa. report cites levels
of radium 400 times the federal drinking water standard.\4\ New
York State's Department of Environmental Conservation analyzed
13 samples of wastewater brought thousands of feet to the
surface from drilling and found levels of radium 226, a
derivative of uranium, as high as 267 times the limit
considered safe for discharge into the environment and
thousands of times federal drinking water standards.\5\
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\4\ op. cit. p. 646.
\5\ scientificamerican.com/article.cfm?id=marcellus-shale-natural-
gas-drilling-radioactive-wastewater
University of Buffalo researchers report the tendency of high-
pressure, high-volume injections to facilitate release of
uranium into flowback water and to bind it to chemicals in the
water.\6\
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\6\ upi.com/Science_News/2010/10/25/Tapping-natural-gas-could-
unleash-uranium/UPI-62061288048109/
Athens authorities are particularly concerned because southeast
Ohio's deep shales are reported to have high levels of uranium,
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possibly especially in the deeper Utica shale.
Our city's water treatment facility can neither monitor nor
adequately remediate these radioactive pollutants.''
The report also states, ``Deep shale drilling and horizontal
fracturing spills, explosions, and leaks have caused high
levels of radioactive and chemical pollution of waters. For
example, the New York Times published a test sample taken Sept.
2, 2009 by the Pennsylvania Department of Environmental
Protection of spilled drilling wastewater, which showed
``radium levels of 6,540 pCi/L, or more than 1,000 times the
drinking water standard.'' \7\
---------------------------------------------------------------------------
\7\ op. cit. p. 644 ff.
Numerous other reports by Pennsylvania authorities discuss
large volumes of discharge into creeks,\8\ including a
tributary of the Susquehanna that resulted in filing of a
lawsuit against Chesapeake Energy by the State of Maryland.\9\
---------------------------------------------------------------------------
\8\ op. cit, multiple documents
\9\ see for example NY Times,, op.cit., p. 1056 ff.; reuters.com/
article/2011/04/20/us-chesapeake-spill-idUSTRE73J6D820110420,
newsworks.org/index.php/local/item/18791-02spfrack
Below surface migration is widespread and well documented. A
Colorado creek, contaminated by benzene from a deep underground
migration of injected chemicals in 2004 which resulted in fines
to Encana by the Colorado Oil and Gas Conservation Commission,
still had high levels of benzene in groundwater monitoring
wells sampled near the creek in mid-2011.\10\ The Proceedings
of the National Academy of Sciences recently documented methane
migration into drinking water supplies.\11\
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\10\ Chakrabarty, Gargi. Commission Oks Record Fine for Natural Gas
Seep, Rocky Mountain News, 8-18-04; Olsson Associates, West Divide Seep
Area Second Quarter Monitoring Status Report for June 2011, Table 1
cogcc.state.co.us
\11\ Stephen G. Osborn, et al., ``Methane contamination of drinking
water accompanying gas-well drilling and hydraulic fracturing,'' PNAS,
May 17, 2011, 108 (20), pp. 8172-8176
The Denver Post reports that just three companies reported 350
spills since January 2010, including releases of benzene and
other carcinogens three times in one month into surface waters
in one county. \12\
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\12\ denverpost.com/breakingnews/ci_18880544, 9/12/11
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The City's letter concludes that the sales will ``irreparably
impair the drinking water supplies and economy of the City of Athens,
Ohio.'' \13\
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\13\ Athens City formal protest letter, October 7, 2011, RE:
Protest of the Bureau of Land Management's Notice of Competitive Oil
and Gas Lease Sale Concerning Parcels in Perry, Gallia, and Athens
Counties, Ohio
---------------------------------------------------------------------------
Ohio University's letter to the BLM, signed by Dr. Roderick
McDavis, states;
Statement of Reasons: It is our duty as an institution of
higher education to lead and support our campus and greater
community as we seek safe living conditions, healthy economies
and fertile lands where we live and work. The potential
December 7, 2011 sale of the publicly owned lands referenced
above poses a threat to a healthy living and learning
environment at Ohio University.
Ohio University is currently unable to support a practice that
is not strictly regulated and highly accountable. We request
the withdrawal of the lease sale until a comprehensive,
objective environmental and economic analysis is conducted and
the absence of risk to our water supply, community health, and
local economy can be assured.
The city of Athens is located south and west of ``The Wayne'' as we
locals call it. The Hocking River runs from the Northwest to the
Southeast corners of the county where it empties into the Ohio River at
Hockingport. The Hocking River and its aquifer is the origin of most of
the counties drinking water. Our county uses several water systems due
to prior contamination from coal mining and past gas extraction. Athens
County has several Class II injection wells, and waste is delivered
from out of state everyday. We have recently experienced serious water
contamination from industrial processes. About eight years ago, it was
determined that the chemical C-8 had been found in the water systems in
the Eastern part of the county. A class action lawsuit was settled with
Dupont, which had been releasing the chemical into the Ohio River for
30+ years. This county has suffered from the effects of resource
extraction and chemical industrialization. Many of you may know that a
few months ago a transfer gas pipeline exploded in Northern Athens
County causing serious damage and destroying homes.
As a resident of this county for 18 years, I have become very fond
of the natural beauty, as have many others who travel to our area on a
regular basis for tourist activity and for those who want to attend
university in a beautiful non-urban setting. Prior to my election I was
aware of hydraulic fracturing, but only from a distance. With `the
Wayne issues' and subsequent appearance of landmen feverishly signing
up private landowners in the county, my knowledge base and
understanding had to increase. In November I traveled to Golden, CO and
received an earful from friends who have lived through the `gas boom'
there. In January, I traveled with nine other Athens county residents
to Wetzel County, W. Va, to see hydraulic fracturing gas extraction
first hand. Having grown up in industrial communities, I wasn't shocked
by the industrial character of the operation. The sheer scale of the
operations, the drastic changes to the landscape, and the loss of
farmers and rural landowners way of life was what shocked me the most.
Listening to residents describe the changes to their lives was
extremely difficult. Many thought they were helping their families.
What they've since learned after 4 years of drilling is that they
aren't better off, and their way of life has changed drastically. The
degradation of the landscape, changes in the topography, and loss of
previously good water wells was significant. It was fortunate that we
were able to see before and after photographs. I quickly began to think
of ``The Wayne'' and other areas of Athens County were leases have been
signed. The stories are not new to the members of this committee. They
are the same no matter what community you travel to that has
experienced this type of drilling. Some are better than others, but the
changes are profound.
The questions began to arise: Can this be process be carried out
without making such a huge footprint to the land? How does a community
handle the increased traffic, and toxic substances traveling on its
roads? How do we protect our water and air from surface damage? What is
happening thousands of feet below the surface? Can the method ever be
safe? Even if fracking, ideally carried out can be perfectly safe, in
practice mistakes happen, and corners are cut because of human error,
and the consequences of such mistakes are potentially extremely serious
and, in the case of aquifer contamination, irreversible and certain to
destroy our entire community.
Where will the vast amounts of water required come from? Our river?
As a city councilperson looking into the Ohio Revised Code and
municipality rights, one quickly learns that our protections are
extremely limited. Where are the checks and balances? Oh yes, and where
are the jobs? Community after community reports insignificant increase
in local employment. All the studies show less employment than what was
initially promised. Property values decline, often drastically
A recent Pennsylvania economic analysis states that reports of job
growth from Marcellus activity are greatly overstated. Rather than the
purported 48,000 jobs, ``Actual jobs data tell a different story. This
briefing paper demonstrates that Marcellus Shale drilling has created
no more than 10,000 jobs. . .The number of jobs created by Marcellus
industries is small--less than 10%--compared to the 111,400 increase in
jobs in all state industries since Pennsylvania's recent employment
trough in February 2010.'' The report concludes, ``The modest
contribution of the Marcellus Shale to job growth must also be balanced
against the impact of drilling on other industries, such as tourism and
the Pennsylvania hardwoods industry. It is also important to balance
the contribution of the Marcellus Shale to job growth against the so-
far unfunded environmental liability of the industry.'' \14\
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\14\ Digging Deeper into Job Claims, Keystone Research Center, June
2011
---------------------------------------------------------------------------
Economic impact studies by researchers independent of industry,
cited by economist Janette Barth (3/4/11), document the negative
economic impacts of extractive industries historically and dispute the
glowing picture painted by industry:
``Fossil Fuel Extraction as a County Economic Development Strategy:
Are Energy-Focusing Counties Benefiting?'', Headwaters Economics,
September 2008. (http:/headwaterseconomics.org) concluded that counties
that were not focused on fossil fuel extraction experienced higher
growth rates, more diverse economies, better-educated populations, a
smaller gap between high and low income households, and more retirement
and investment income.
Another study, ``Mining the Data: Analyzing the Economic
Implications of Mining for Nonmetropolitan Regions'' (W.R. Freudenberg
and L. Wilson, Sociological Inquiry, 72, 4: 549-75), concluded that
unemployment and poverty worsened in mining counties in non-
metropolitan regions. It found that the highest levels of long-term
poverty are in places where there was once a thriving extractive
industry.
Why doesn't the industry disclose the contents of fracking waste?
Perhaps this is the most disturbing feature of the entire undertaking--
if the method is safe and established what possible justification could
there be for excluding the industry from almost all of the federal laws
that protect public health?
Our community is very concerned about air emissions from this
extractive industrial process. Our state laws barely regulate
emissions, permitting virtually unrestricted open venting and flaring.
Because the industry is exempted from aggregation standards of other
industries, tons of volatile organic compounds will be emitted without
reporting, let alone any restriction. U.S. EPA reports that hydraulic
fracturing of one well creates approximately 23 tons of volatile
organic compounds (VOCs) emissions, roughly 200 times more than if the
well was not hydraulically fractured.\15\
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\15\ USEPA Proposed Rule, ``oil and Natural Gas Sector: New Source
Performance Standards and National Emission Standards for Hazardous Air
Pollutants Reviews,'' Federal Register/Vol. 76, No. 163 at 52757,
http://www.gpo.gov/fdsys/pkg/FR-2011-08-23/pdf/2011-19899.pdf
---------------------------------------------------------------------------
The New York Times report on risks of deep-shale drilling and
horizontal hydraulic fracturing documents air pollution issues: ``Air
pollution caused by natural-gas drilling is a growing threat. . ..
Wyoming, for example, failed in 2009 to meet federal standards for air
quality for the first time in its history partly because of the fumes
containing benzene and toluene from roughly 27,000 wells, the vast
majority drilled in the past five years. . .In Texas, which now has
about 93,000 natural-gas wells, up from around 58,000 a dozen years
ago, a hospital system in six counties with some of the heaviest
drilling said in 2010 that it found a 25 percent asthma rate for young
children, more than three times the state rate of about 7 percent.''
\16\
---------------------------------------------------------------------------
\16\ nytimes.com/2011/02/27/us/
27gas.html?_r=4&scp=5&sq=natural%20gas&st=cse
---------------------------------------------------------------------------
The USEPA \17\ documents air emissions (p. 55): ``One of the
largest potential sources of air emissions from hydraulic fracturing
operations is the off-gassing of methane from flowback before the well
is put into production. The NYS dSGEIS [Draft Supplemental Generic
Environmental Impact Statement] estimated that 10,200 mcf of methane is
off gassed per well.'' The document reports up to 24,000 mcf of methane
released per well (Armendariz, 2009). ``This gas is typically vented or
flared, although reduced emissions completion methods can capture up to
90 percent of the gas. High concentrations of methane could also pose
an explosion threat. On-site fuel tanks and impoundment pits containing
flowback may also be sources of VOC and hydrogen sulfide emissions (ICF
International, 2009a). The VOCs found in flowback may include acetone,
benzene, ammonia, ethylbenzene, phenol, toluene, and methyl chloride
(NYSDEC, 2009).''
---------------------------------------------------------------------------
\17\ EPA/600/D-11/001/Feb 2011water.epa.gov/type/groundwater/uic/
class2/hydraulicfracturing/index.cfm
---------------------------------------------------------------------------
The EPA report continues, ``Truck traffic is also a potential major
source of air emissions.. . .the National Park Service estimated that
total truck traffic of between 300 and 1,300 trucks per well would
occur in the Marcellus Shale production areas. The NPS estimated that
this could have a significant effect on regional nitrogen oxides levels
(NPS, 2008).'' USEPA also states, ``Reports from Texas have linked
pollutant emissions from natural gas drilling in the Barnett Shale to
substantial reductions in air quality (Michaels et al., 2010).
Additionally, areas of highly concentrated natural gas development in
southwest Wyoming and eastern Utah have experienced episodes of
degraded air quality (e.g., high levels of winter time ozone
concentrations). Diesel engines used to run compressors, generators,
drill rigs, and pumps may also create significant emissions.'' \18\
---------------------------------------------------------------------------
\18\ EPA/600/D-11/001/February 2011
---------------------------------------------------------------------------
Theo Colborn and colleagues \19\ state: ``In addition to the land
and water contamination issues, at each stage of production and
delivery tons of toxic volatile compounds (VOCs), including BETX, other
hydrocarbons, and fugitive natural gas (methane), can escape and mix
with nitrogen oxides (NOx) from the exhaust of diesel-
fueled, mobile, and stationary equipment, to produce ground-level ozone
(CH2MHILL 2007; Colorado Department of Public Health and Environment
[CDPHE] 2007; URS 2008; U.S. Congress, Office of Technology Assessment
1989). One highly reactive molecule of ground level ozone can burn the
deep alveolar tissue in the lungs, causing it to age prematurely.
Chronic exposure can lead to asthma and chronic obstructive pulmonary
diseases (COPD), and is particularly damaging to children, active young
adults who spend time outdoors, and the aged (Islam et al. 2007; Tager
et al. 2005; Triche et al. 2006). Ozone combined with particulate
matter less than 2.5 micrometers produces smog (haze) that has been
demonstrated to be harmful to humans as measured by emergency room
admissions during periods of elevation (Peng et al 2009). Gas field
ozone has created a previously unrecognized air pollution problem in
rural areas, similar to that found in large urban areas, and can spread
up to 200 miles beyond the immediate region where gas is being produced
(U.S. Congress, Office of Technology Assessment 1989; Roberts 2008).
Ozone not only causes irreversible damage to the lungs, it is similarly
damaging to conifers, aspen, forage, alfalfa, and other crops commonly
grown in the western U.S. (Booker et al. 2009; Reich 1987; U.S.
Congress, Office of Technology Assessment 1989). Adding to this air
pollution is the dust created by fleets of diesel trucks working around
the clock hauling the constantly accumulating condensate and produced
water to large waste facility evaporation pits on unpaved roads. Trucks
are also used to haul the millions of gallons of water from the source
to the well pad.''
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\19\ Theo Colborn, C. Kwiatkowski, K.Schultz, and M. Bachran,
``Natural Gas Operations from a Public Health Perspective,''
International Journal of Human and Ecological Risk Assessment, 17(5)
Sept 2011
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So again as an elected official, I ask: ``what does our Athens
Community gain''? Increased tourism in the Wayne? Unlikely. Better
hunting? Not likely if we look at the results of the West Virginia US
Forest Service study on the effect of spilled fracking fluids on
forests \20\ or the new study on animal impacts \21\. Congested
roadways? I think of schools that are situated close to the National
Forest. In Wetzel County, the school buses have to be escorted on
narrow winding county roads when the industry is operating their
vehicles, which is almost continuous. The associated infrastructure and
building transfer lines through forests leave an extensive footprint.
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\20\ 56% of trees in the fluid application area were dead within
two years. Mary Beth Adams, Land Application of Hydrofracturing Fluids
Damages a Deciduous Forest Stand in West Virginia, J. Environ. Qual.
40:1340-1344 (2011) http://www.nrs.fs.fed.us/pubs/jrnl/2011/
nrs_2011_adams_001.pdf
\21\ Bamberger, M. and Oswald, R., ``Impacts of gas drilling on
human and animal health,'' New Solutions, 22(1) 51-77, 2012, in press.
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Reports from North Dakota and Pennsylvania on social impacts paint
an ugly portrait of increased crime, including rapes and other
assaults, suicides, people displaced from housing due to outrageous
increased housing prices due to the influx of temporary workers, and
other negative impacts on the quality of life.
Dr. Simona Perry documents the social impacts of the so-called
shale boom in Bradford County PA.\22\ She compares the impacts to the
trauma of abusive relationships. Rapid transformation of landscape from
rural, agricultural to industrial with greatly increased truck traffic
and more dangerous and inconvenient travel as well as dust, diesel
fumes, and noise are major sources of aggravation, stress and fear. The
people she studied have experienced irreversible changes in connections
they had with families' history, childhood memories, land, and
neighbors, as well as with present and future. The fear of losing land,
health, and children's future gave members of a focus group a ``death''
feeling. One member described it as a dread in the pit of her stomach.
``It feels like we're losing our love. The things we love the most may
be taken away.'' One resident described the situation as deception
desecration, and denial. They talk repeatedly of broken hearts. Dr.
Perry tells the story of a man arrested and incarcerated for 5 days and
given a diagnosis of bipolar disorder as well as a bill for roadwork
for hampering workers using his land as a staging ground. Dr. Perry
uses the term, cycle of abuse, to describe the impacts of this
industrialization on their community, lives, land, and loved ones.
---------------------------------------------------------------------------
\22\ chec.pitt.edu/mediasite.cidde.pitt.edu/mediasite/
SilverlightPlayer/Default.aspx?peid=689293c50f404f12b8c628b8f2285780,
Dr. Simona L. Perry, Rennselaer Polytechnic Institute, ``It's like
we're losing our love'': Bradford County social impacts from shale
boom. 11/11
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Athens County is a uniquely valuable region for its ecotourism, the
presence of a major university, and a National Forest. Soon we will
have the US Rt 33 corridor completed, which happens to go thru ``the
Wayne''. What an ironic twist if all the careful environmental
engineering that went into constructing the new highway goes to the
wayside for hydraulic fracturing development. And even more, what a
tragedy if our viable local economy and community with its vibrant
tourism, arts, green technologies, and local and organic foods
industries are destroyed in the rush to exploit our region for shale
gas and oil.
To come back to the risks to water: The risk of damaging and
extracting vast amounts of water from our supply could be a game
changer for this area. Will we become like Arizona where we have to
have controlled use? Our area has gone through significant water
cleanups from the coal tailings in our creeks and from underwater mine
flooding. In Wetzel County, after the industry extracted water from the
streams and local sources, they began to ship it in by tanker truck and
also in pipelines that stretch for miles along the county roads as
water is pumped from the Ohio River. Will this happen to the Hocking
River? A salient discussion point: How is it that 5% of landowners, (a
very generous estimate of landowners choosing to lease) can determine
the course of public policy in Athens County?
While one should not neglect the energy needs of the country and
region, it is imperative to our region that we develop sources of
energy that do not destroy our economy, health, and environment. And it
is essential that these sources are developed on a level playing field,
where dangerous forms of extraction are not encouraged by industry
misinformation, government ties to industry, and shady deals. Already
there have been evidence of unethical dealings on the part of landmen
\23\, and the Ohio Attorney General feels strongly that additional
oversight is needed in the process of land leasing and in state and
federal regulation of the industry. New laws are required to overturn
such bizarre measures as the ``Halliburton Loophole'', and the
companies that carry out hydraulic fracturing must be accountable for
their impacts on communities.
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\23\ http://ecowatch.org/2012/as-fracking-boom-hits-ohio-deceptive-
industry-practices-squeeze-landowners/provides links to an audio tape
and transcript of a leasing session in which a Cunningham Energy
representative states that only water is used in the drilling and
fracturing process in addition to making other statements that conflict
with the lease stipulations and industry practices. Recorded in Athens,
Ohio, October 7, 2011.
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Our County Commissioners, Democrat and Republican, recently
unanimously passed a resolution calling on the U.S. Congress to pass
the FRAC Act, which would repeal the exemptions from the Safe Drinking
Water Act and require disclosure of chemicals used in fracking.
Additionally, the Commissioners' resolution states, ``We call upon the
state of Ohio and the Ohio Department of Natural Resources to
Increase the number of state inspectors commensurate
with the planned increase in drilling activities
Conduct geotechnical investigations of soil and rock
stability prior to any drilling or surface impoundments such as
dams or holding ponds
Require full disclosure of the chemical constituents
used during deep shale drilling and hydraulic fracturing and
the disposal methods for deep shale drilling and hydraulic
fracturing waste
To update regulations on the use of class 2 injection
wells to reflect the increased volume and known content of deep
shale drilling and hydraulic fracturing waste
Regulate water withdrawal from public waters for
hydraulic fracturing operations
Prevent installation of wells in source water
protection areas
Increase the bond required to cover for deep shale
drilling and hydraulic fracturing operations
Increase the severance tax to pay for county-level
remediation.''
Like Attorney General Dewine's recent statements, this call speaks
to the inadequacy of Ohio law and enforcement capabilities to protect
our air, water, and local economic health from the impacts of this
industrial process.
On this particular date as an elected official and one who has to
answer to many constituencies, I do not believe the necessary safety
regulations are in place to begin drilling in the Wayne National Forest
in Athens, County, Ohio.
As national leaders and policymakers, I implore you to stop kicking
the can down the road to the next state, region or community. This is
no different than the gas drillers who pick up and move their
operations to a new locality after imparting damage. These issues
demand thoughtful regulation at the national level. There are tens of
thousands of voters who are negatively impacted everyday. Is the return
worth the demonstrated risks?
______
Mr. Lamborn. All right. Thank you and thank all of you for
your testimony. We will now begin our first round of questions.
That is exactly why we are here, to learn about the need for
regulation, and I in particular want to learn about state
regulation versus Federal regulation.
So I will start with you, Mr. Stewart. Do you see a
difference between the two, and in your opinion, which would be
better? Because there is no question that there is going to be
and needs to be regulation, but which would be better?
Mr. Stewart. Mr. Chairman, as I said in my testimony and I
think you heard from Chief Simmers, most of the environmental
laws that are being applied in the state are being applied
underneath the landmark Federal laws, Clean Water Act, Safe
Drinking Water Act, Clean Air Act, that delegate authority down
to the states, because the states have their unique
characteristics and, therefore, it is the best to leave it down
to the states to do that.
That is the reason the STRONGER organization exists
particularly in terms of Resource Conservation and Recovery
Act, to make sure the states keep that authority, but
continuously identify gaps and make recommendations in ways to
improve and ways to fill the gaps. So the states have generally
been delegated as authorities over time.
The State of Ohio has a complete and thorough regulatory
structure. Just last year in the last general assembly, they
enacted Senate Bill 165. That was the most significant
amendment to oil and gas law since the law was created in 1965.
It addressed all the issues being debated nationally and gave
an Ohio response. Since that time, as I have testified,
STRONGER has come in and peer critiqued that. The person that
chaired the STRONGER review was one of the most noted
environmentalists on oil and gas laws known in the United
States. Dr. Puls, who was conducting the EPA study, sat in the
on the review. The review team, which was endorsed by
environmental stakeholders, state oil and gas agency
stakeholders, industry, USEPA, USDOE, said the State of Ohio is
professional, well managed, meeting its objectives and then
there is added that there a lot to recommend to other states on
how to do it right.
Mr. Lamborn. What does a natural gas company have to do in
Ohio under Senate Bill 165 before it can drill? What kind of
regulation or scrutiny does it face?
Mr. Stewart. Before you can get a drilling permit from the
State of Ohio, you must have the ability, you must show the
ability through bonding that you are prepared to meet all of
the regulatory structures that are set forth in Ohio 1509 and
the Ohio Administrative Code 1501. Then you must apply for a
permit and show the plan to drill and construct and operate the
well according to the regulations and the statute. Then you
must apply that.
As it relates to hydraulic fracturing, after 165, it was
made clear that once you hydraulically fracture a well, you
must submit to the public record what is called frack ticket
which shows you everything that went into the well, at what
stage it went into the well, how much of it went into the well,
from the beginning, called the pad, to the very end, called the
flush. You must hand in what is called a frack chart that shows
you pressure and rate over time. All of those chemicals must be
listed on MSDS sheets on the ODNR website. Because of that one
amendment right there, 165, the Ohio Environmental Council
wrote a letter in support of Senate Bill 165. And I have to
note that 119 out of 130 members of the Ohio General Assembly
who voted on the bill voted in support of Senate Bill 165.
Mr. Lamborn. Thank you.
Mr. Taylor, you have already gone through this some
already, but what is the difference in the economy locally now
versus a few years ago before hydraulic fracturing combined
with horizontal drilling was available?
Mr. Taylor. It is in my report. There is a lot of
affiliation. The steel industry is coming back to life. Two
years ago or a little bit more, we had 40 percent unemployment
in our local. With 40 percent of unemployment, we were very
much having to reach out to areas across the country in order
to provide employment for our members. Now not only do we have
those 40 percent working, we are a hundred percent employed
with no future layoffs. As reported, we had over 440 travelers
from outside the country--from the country, from all over the
country I should say, into the Mahoning Valley area working at
one time or another drawing an income.
So with that expansion, now we are looking into getting
more places, touching the bases on training, experiencing
growth that we have never even dreamed of having.
Mr. Lamborn. Thank you.
Mr. Johnson?
Mr. Johnson of Ohio. Thank you, Mr. Chairman.
Mr. Taylor, we will just continue on with you. In your
testimony, you talk about this economic recovery that Mahoning
Valley has seen in the past few years. Can you briefly explain
how the morale of citizens in the Mahoning Valley, folks that
you deal with every day, has changed because of all the
development of shale and natural gas?
Mr. Taylor. It is very easy to explain, Mr. Johnson,
Congressman Johnson. Two years or better there was a gray cloud
that was formed over the Youngstown area. Since the
announcement of V&M Star and then with this industry, it has
been a very optimistic attitude, very. The funds that we have
created for our local as well as for the membership and drawing
an income has been up tremendously.
As I stated before, two years ago when you have a lot of
heartaches and you are really worried about what was happening
within the community or outside the community and membership
outside of the community, you tend to worry, and there is a lot
of resources that you just can't stretch out to have. Now we
are just having a great optimistic attitude. The growth is
huge. We are trying to plan for the future. We have put a
program together called Pipe. It is a marketing program to not
only reach out to young people to get into this industry, but
also to explore trying to gather a greater market share.
Mr. Johnson of Ohio. Great. In your testimony, you said
that you would rather be dealing with the headaches having too
many opportunities rather than the heartaches of having no
opportunities. How do you think the Plumbers & Pipefitters
would react if the Federal EPA or other bureaucratic
organizations in Washington issue new rules that will slow down
this development and potentially cost your members their jobs?
Mr. Taylor. It would be very tough because we don't want to
go back to what was in the past. There is 60 years of data that
is here. Let us look at that. Let us improve what we can. Let
us make it safe. Nobody wants it not safe. But we have enough
where we can move forward and not stop what looks to be a
bright future for us, especially in our industry.
Mr. Johnson of Ohio. Well, thank you. Thank you for those
answers and thank you again for your testimony today, and I
look forward to continuing to work with you and companies that
are trying to make sure that this opportunity is there and
available for the citizens of Eastern and Southeastern Ohio.
Mr. Pounds, in your testimony you talk about the economic
benefits that Ohio could see if a major petrochemical company
placed a new ethane cracker. The Chairman reminded me under
clothing of polyester suits, and I owned a couple of those.
[Laughter.]
Mr. Johnson of Ohio. I am sure you probably did, too. I
hate to put you on the spot here, but you wouldn't happen to
have any good news on that front today, on that cracker plant,
do you?
Mr. Pounds. Well, I wish I could give you the answer you
are looking for. I know that Royal Dutch Shell has indicated
they are going to build a cracker in the Appalachian Midwest. I
didn't know when I was a kid that I lived in Appalachia, but I
guess we did. That tells me it is West Virginia, Pennsylvania
or Ohio, which is pretty obvious. While I hope it is on this
side of that imaginary line that we call the border, I will
tell you the good news is wherever it is at in the region, it
is going to benefit our chemical industry and our folks in
southeastern Ohio.
We already have a chemical industry here. We already have a
strong polymer/plastics industry in the state which are going
to be major customers for the products of that cracker. The
reason they want to do it in this region is that ethylene and
some of the other fractions that you will take out of the
ethane and the propane, they don't like to travel. You don't
want to transport them. There are expenses in doing that.
So by fracking the stuff here and using it here locally,
the chemical industry, I think, will see more chemical plants
built, a lot of them in your districts. I think the ones that
are already here are going to expand. We have tremendous
resources as does Pennsylvania. We have the river with barging
facilities along it in some of the sites that are being
considered. We have tremendous workforce potential here.
Mr. Johnson of Ohio. Oh, absolutely. Correct me if I am
wrong, but this is a manufacturing corridor all along Eastern
and Southeastern Ohio. If we want to see manufacturing come
back like we haven't seen it in many, many years, these are
products that would come out of that cracker plant that would
go into many, many different forms of manufacturing and you
think about the manufacturing companies that would come here
and park on top of a nearly boundless source of energy because
it would significantly reduce their operating costs.
Is that a valid----
Mr. Pounds. It is absolutely true. We already have had
chemical companies contact us talking about when do you think
we are going to know because we want to get looking at sites
that are close to the cracker.
Mr. Johnson of Ohio. The Governor and Senator Portman and
I, we have been working hard with trying to make sure that the
Shell folks know that we want that cracker plant.
Mr. Pounds. We appreciate that very much.
Mr. Johnson of Ohio. Mr. Chairman, I have more questions. I
will wait for the next round. I yield back.
Mr. Lamborn. We will have a second round of questions right
after this. Then we will conclude.
Mr. Thompson.
Mr. Thompson. Thank you, Chairman.
Mr. Pounds, I want to start with you. I want to wish you
best of luck on the cracker, but I am not routing for you.
[Laughter.]
Mr. Thompson. I will make it real clear. I am from the
Keystone state. But you know what? We are all going to win.
Mr. Pounds. Absolutely.
Mr. Thompson. Let us break this down a little bit. And you
got some of it referenced. I want to look specifically in Ohio.
Can you give us some idea of the variety of manufacturers that
use natural gas as a feedstock or as a process?
Mr. Pounds. Natural gas as an energy source to generate
electricity, that is increasingly important, and obviously coal
has got a target on its back primarily from the Federal EPA
because of its war on carbon.
So going forward that is going to be important to all
manufacturing, because energy for most manufacturing companies,
certainly in the chemical industry, is second or third on your
cost structure. We are a very intense user of energy. So that
is going to be important to all manufacturing in your state and
Ohio certainly, being able to generate electricity from natural
gas if we get to that point.
But for the chemical industry, the real advantage here is
that we are going to be making ethylene from natural gas
whereas our competitors in Europe primarily do it from oil.
They buy oil.
Mr. Thompson. We hear the term wet gas. Can you talk about
that? There is no wet gas in my Congressional district. There
seems to be obviously an extra advantage to wet gas.
Mr. Pounds. Certainly. Natural gas as a fuel for boilers is
a commodity. Right now it is a couple of bucks, a little over a
couple of bucks a million BTUs, British Thermal Units. When it
has the wet gas fraction in it, the propanes, the butanes, the
ethanes, that wet gas has much higher value because you don't
burn that as fuel. You take that off. You send it to the
cracker. The cracker then produces the very high value
ethylene, and then from the ethylene you go down to the other
things.
Those are all sold basically on performance, for medical
devices, whatever people are fabricating, working with, and you
are talking basically about the polymer side, the chemical
business then, the absolute versatility, the productivity, the
creativity of people that do that in the United States. You
think about the plastics, for example, in hospitals, any kind
of flexible tubing, whatever kind of properties you want for
that. Essentially every material in this room has some sort of
polymer content to it except those of us who have natural fiber
suits, which I do not.
I think if you just look around and consider that, it is
such an integral part. We take it for granted to a great
degree. But it is really the American manufacturing advantage
over the rest of the world. I think that we can produce those
kinds of products, continue to put a lot of research and
development into it.
So I think the potential for revitalizing the manufacturing
corridor in Pennsylvania and Ohio is also absolutely
incredible. Eighty percent of our gross domestic product in
Ohio was from manufacturing. We are down under 50 percent now.
But we are a manufacturing state. So I think it is coming back,
and it is really becoming very encouraging.
Mr. Thompson. So to take that one step further, in your
opinion, let us take it right down to the individual citizen,
people that live in every city, every borough, every township,
how would they benefit from that?
Mr. Pounds. The American Chemistry Council economic study
that I referenced, and I believe the Committee has it in their
possession, talks about the job creation just in the chemical
industry-related piece of this of about 17,000 jobs, roughly
2,500 of those directly working in new chemical facilities or
expanded facilities here, then another 6,000 or so that are
going to be created because of the support structure,
transportation, engineering, consulting, buying materials and
supplies for the facilities, and then the induced effect which
is when the folks that get those first round of jobs go out and
spend money, you need government services, all that sort of
thing. You get up to a number around 17,000.
That is a pretty standard model that economists use, and I
think it is pretty representative of what you can expect here.
That is just related to the chemical industry. Other
manufacturing, certainly I think you are going to see it come
on along here. I have heard a lot of discussion about,
particularly with the drilling site, those people aren't going
to be permanent here. Well, that may be because they do have
some special expertise in things. But the other jobs that are
going to be created in the chemical industry, downstream from
that, are going to be permanent jobs. I think it is going to be
a tremendous increase.
One of the issues we have in the chemical industry right
now is job preparedness. Do we have the folks ready to work in
the expanded chemical industry. Even the basic entry level
chemical operator jobs require a pretty sophisticated
educational background, not college, but we need to have people
with good math skills, understand physics, chemistry,
mechanical systems. So there is going to be much, much better
kinds of jobs available to our citizens than there have been in
the past.
Mr. Thompson. I chair the Congressional Career and
Technical Education Caucus with Mr. Langdon from Rhode Island,
and I couldn't agree more, the opportunities that are exciting
for folks through career and technical education.
Thank you, Chairman.
Mr. Lamborn. Thank you.
For our second round of questions, thank you for your
patience, for your earlier testimony.
Mr. Stewart, there has been some concern expressed over
groundwater and could it be contaminated during the drilling
process or by the water that was used in the well after it is
disposed of later. Can you address those concerns from your
perspective?
Mr. Stewart. The key to protecting groundwater resources is
called casing in cement. You asked me earlier what steps you
have to go through in the regulatory process in the State of
Ohio. When you apply for a permit, you must put together a
casing program that is then approved through the permitting
process.
The casing program is specifically designed to protect
groundwater resources. It is called the initial strain, which
is called surface casing, which is set through the groundwater
resources and then cemented. So even if there were
contaminants, as was suggested earlier, from other resources
like coal mining, they couldn't reach the surface casing. And
it is even further protected by the initial strain. So the
entire construction of the well is critical to the process.
Where there have been problems with oil and gas
development, almost always it is related to well, construction
issues. So the State of Ohio and other states that have this
activity are in a constant search about how to improve the
regulatory structure specifically as it relates to well
construction.
Mr. Lamborn. Thank you. Now, what about the disposal of
water afterwards?
Mr. Stewart. That is a very good question.
Mr. Lamborn. After it is used in the fracking process.
Mr. Stewart. That is regulated underneath a process set up
underneath the Safe Drinking Water Act called the Underground
Injection Control Program. The best and most preferred method
for managing low toxicity, high volume waste, which is produced
water from formations, is to put it down a Class II well,
otherwise put it in the same formation it came from or deeper.
Often under the Class II program set up by USEPA, the
states gain primacy that delegated authority on behalf of USEPA
to do that on their behalf and the states'. That is the case in
the State of Ohio. Since the early 1980s, the Ohio DNR, the
agency run by Rick Simmers, has set up a program for UIC Class
II injection. In 1985 it was actually the law of State of Ohio.
It was enacted at that time that all produced water must be
disposed of down a Class II well at standards exceeding the
Safe Drinking Water Act, Federal landmark law. And since that
time, there has been a system of Class II wells built up and
down eastern Ohio to manage Class II just specifically from oil
and gas wells taking on average 7 to 8 million barrels of
produced water every year.
Mr. Lamborn. So the water that comes out of the well is put
back into another well?
Mr. Stewart. It is put down into a well specifically
constructed to the standards of the Safe Drinking Water Act
specifically designed to manage that waste stream and put back
into the formation it came from or deeper.
Mr. Lamborn. Now, I have just seen a little bit of the
proposed BLM regulations that have only come out several weeks
ago, and I am still studying those. But I am concerned that it
adds another layer of sometimes contradictory regulation on top
of the current state regulation.
What could that do to the economy that we are talking about
was in the doldrums previously that now is coming back strong
if we add that second layer of regulation and it--well, I have
concerns. But tell me if those concerns are well founded or
not.
Mr. Stewart. That is a good question, Mr. Chairman. The
draft that I have seen--I understand that there is no official
rule promulgation or anything out for official comment. But I
have seen a draft just this past week. My read on it is that
they are trying to duplicate what is already been done with
Frack Focus, a program set up underneath the Groundwater
Protection Council in coordination with the Interstate Oil and
Gas Compact Commission. So we have a Federal agency trying to
duplicate what is already been done with excellence, which is
also supported by industry, and many of the states' regulatory
agencies are lining up behind it as well.
The other troubling point that I saw in it was that it also
set up a duplicative reporting system where you not only report
what you actually use, but try to predict what you would use,
and it is very hard to do that, because you are never going to
know exactly how you are going to stimulate a well until you
expose the formation, have done electric logging on it,
evaluate the formation potential, thickness, geology, rock
characteristics, rock mechanics, to better understand how you
are going to stimulate this well the most effective way
possible.
Mr. Lamborn. There are different formulas and processes of
putting it under pressure that are used in each well?
Mr. Stewart. Oh, absolutely. Hydraulically fracturing the
well is a function of petroleum engineering that is highly
engineered to get exactly what you want to do.
Mr. Lamborn. So each well is unique?
Mr. Stewart. Absolutely.
Mr. Lamborn. Different from the next well?
Mr. Stewart. Even from the well that was drilled half a
mile away it can be very much unique.
Mr. Lamborn. So if the feds come in and say we want to know
every time you make a change, that could just cripple the new
well production?
Mr. Stewart. What I read in the draft was that they are
trying to get you to predict what you would use. And what I am
testifying to, sir, is that that is very difficult to do, and
in the end what you predict will more than likely not be what
you actually use.
Mr. Lamborn. So at the end you go back to them every time
you make even a minor change?
Mr. Stewart. You create a bureaucratic system that doesn't
work.
Mr. Lamborn. That would just tie up production
astronomically.
Mr. Stewart. I admire the forestry department for going
back and looking at their environmental assessment. Surface
impacts from pad drilling are different from the type of
drilling that has taken place in the Wayne National Forest over
time. There are thousands of wells in the Wayne National
Forest. I think they should look at the environmental impacts.
But I don't think that to put layering on of new regulation
that is already being effectively done by the states underneath
delegation from the Federal landmark laws and which has been
proven by a peer-critiqued review process is going to be very
effective.
Mr. Lamborn. Thank you.
Mr. Johnson.
Mr. Johnson of Ohio. Thank you, Mr. Chairman.
Back to that cracker plant, Mr. Pounds, is it safe to say
that if state legislators that might be in opposition to
hydraulic fracturing or the Federal bureaucrats are successful
in getting a moratorium on hydraulic fracturing, do you think
that cracker plant will come to Ohio or the Appalachia region?
Mr. Pounds. Representative, I really can't answer that.
That is a decision that is made at the corporate level of
Shell. That is way, way beyond my ability to understand. But I
would say that if there is a moratorium on fracking, I think we
will have lost a once in a lifetime opportunity to really
address more critically for the country our energy issue and,
secondarily and most importantly, the chemical industry, our
basic ability to be competitive in our chemical manufacturing
and then derivatively through the entire manufacturing in the
United States.
Mr. Johnson of Ohio. I appreciate that.
Mr. Stewart, you sit on the board of STRONGER, an
organization consisting of state regulators, industry officials
like yourself, and environmentalists that look and evaluate
states' oil and gas regulations.
Can you tell the Subcommittee today how Ohio's oil and gas
regulations stack up against other states'?
Mr. Stewart. Mr. Johnson, the State of Ohio has gone
through three reviews underneath the state review process, '95,
'05 and then 2010. In the '95 report they found regulatory
gaps, suggested ways to improve, and from that came the very
first what is called RBDMS database system in which the public
has vast new access to resources going on with oil and gas
activity and the regulation from them.
In 2005 following House Bill 278, there was another review
that found the program to be well managed and functioned. In
2010 the report just specifically focused in on hydraulic
fracturing and well construction issues. And that is when, as I
testified, they said the program is well managed, professional,
meeting its program objectives, and they have a lot to be proud
about how they do the job.
So the collaborative group of stakeholders representing
parties that usually seem to make war on each other come
together in a corral called the guidelines, which are the
national set of guidelines itemizing elements necessary for
good state regulatory program, they come together with their
partners at USEPA and DOE and actually try to find ways to
improve the situation instead of using it for political
reasons.
Mr. Johnson of Ohio. In your opinion, what would happen to
the oil and gas industry in Ohio if the Bureau of Land
Management's proposed rulemaking and regulating hydraulic
fracturing for Federal lands is copied by the Federal EPA to
regulate oil and gas development using hydraulic fracturing on
private lands?
Mr. Stewart. Mr. Johnson, I think it would be very
difficult for them to overlay a regulatory system that has
already been delegated down to the states. There is this threat
that EPA will step into an area that they have never stepped
into it as it relates to all of the states. Even EPA will tell
you that in order to manage--we mentioned before 1.2 million
wells have been hydraulically fractured over time here in the
United States--it would be very difficult for them to
effectively step in and manage that on behalf of the state.
There are 36,000 wells drilled in this country every year.
So what would happen, you would have a permitting morass that
would stop oil and gas development in the United States, and
the price of oil and gas would skyrocket, and Jack's members
would go back to the foreign countries that they were forced to
go to in the first place.
Mr. Johnson of Ohio. Thank you.
Ms. Papai, you stated a quote. There was one individual in
there I believe--I can't remember which one it was, but he said
we can't protect our water supply.
Ms. Papai. The Mayor is concerned about protecting the
water supply, yes.
Mr. Johnson of Ohio. His exact quote was what? He said we
can't protect our water supply, right?
Ms. Papai. He said, quote, ``Our city's water supply,
economy, safety, and public health will all be severely harmed
by the sales.''
Mr. Johnson of Ohio. What science went into that? What
analysis was done to lead him to that assertion, do you know?
Ms. Papai. He gets his research and where----
Mr. Johnson of Ohio. You are on the city council?
Ms. Papai. I absolutely am.
Mr. Johnson of Ohio. Have you engaged with the state
Department of Natural Resources? Have you looked at their
regulatory process and have you met with members?
Ms. Papai. I have been doing that most recently and also at
the ODNR and Ohio Revised Code that we have to follow, and
there are many deficiencies. There are, dare I say loopholes,
but situations for regulation. That is my largest concern, is
the regulatory aspect of it. I have visited fracking sites. I
have been to areas.
Mr. Johnson of Ohio. You stated in your testimony that
there is one in Pennsylvania, I believe you said, where you
cited an example where fracking had----
Ms. Papai. A study that had been done.
Mr. Johnson of Ohio.--contaminated drinking water. Is that
what you said?
Ms. Papai. Yes.
Mr. Johnson of Ohio. You know that for certain? Have you
told the EPA about that? Because Lisa Jackson is looking for
one. Have you notified the EPA that you have one?
Ms. Papai. Well, there is the Pavilion Study that is out
there.
Mr. Johnson of Ohio. I would encourage you to write a
letter as soon as we are done here, because the Federal EPA is
looking for one. So if you have an example of one, I would
encourage you to do that.
Ms. Papai. No problem.
Mr. Johnson of Ohio. Thank you, Mr. Chairman. I yield back.
Mr. Lamborn. And to Pennsylvania, Mr. Thompson.
Ms. Papai. Go ahead, Mr. Thompson.
[Laughter.]
Mr. Thompson. Thank you. Thank you, Chairman.
Ms. Papai. The Keystone state.
Mr. Thompson. There you go, that is right, Keystone state.
Mr. Taylor, first of all, as a proud dad of both a son and
a daughter-in-law in the United States Army, thanks for what
your union does, working on the partnership both of training
programs that we have all supported and of putting our--they
are not all young people. I do not want to say minor young
people, but there are many heros of many different ages
serving, that when they are done with that service, that they
have a place of great training that they can come to. So I
appreciate that.
Mr. Taylor, how important are energy costs to the
employers, the manufacturers, where your workers work? What
kind of role does energy cost play for those job providers?
Mr. Taylor. I can say that it is a big part of their budget
when they go to bid a project. Up in the audience here, to
answer that better, is Bill Cornell from McCarl's. He is vice-
president of operation construction. And he can tell you the
cost factors and the breakdown of it. Since I represent the
labor side, we have our goals in training and then in
capabilities of the manpower. But I can tell you that when we
sit down to discuss--we have within our organization a great
labor/management group. When we sit down, we talk about the
situations within our industry, the pitfalls, the positives. We
try to work together on them. And that is a constant
conversation, is the outside, not just the wages, but all the
expenditures that goes into a project for a bid to make a
profit for a business.
Mr. Thompson. We have had a time just 3, 4 years ago that
natural gas was $13, $14 a thousand cubic feet. It is $2.40
today. So let us go back in time when the natural gas, we had
to rely on other countries for some of it. Is it fair to say
that when energy costs are high, it is crushing to jobs here in
Ohio?
Mr. Taylor. Yes, very much so.
Mr. Thompson. Thank you.
Mr. Stewart, I talked in my opening comments natural gas
needs to be pursued. It is an opportunity to seize, but the
responsibility falls on all of us to do that and certainly to
protect the public interest and protect both the health of
people, citizens and environment. So in your opinion, why are
states best suited to accomplish that mission versus the
Federal Government?
Mr. Stewart. EPA's regulatory report in 1988 to the U.S.
Congress as it related to regulation, Subtitle C of the
Resource Conservation Recovery Act, EPA recommended to Congress
and then Congress further adopted specific treatment to oil and
gas that recognized that because of the unique geologic,
geographical, population, industry characteristics that changed
from state to state, that it is the states, therefore, that are
the best regulators for this industry. And that philosophy has
generally carried through under treatment underneath Clean
Water Act, Safe Drinking Water Act, Clean Air Act, where they
delegate that authority down because the states know their
individual specifics better.
That is another way of saying that Pennsylvania and Ohio
really are not alike. There is a reason the river runs through
it. We are all different from Texas. And Texas is different
from California, thank God, and we are all different from
Alaska.
Mr. Thompson. I thought we put that river there just to
stop immigration.
[Laughter.]
Mr. Stewart. Actually it was geology.
Mr. Thompson. Oh, it was geology. A follow-up to that then,
and you really started to address that, why would a Federal law
or frankly Federal primacy over regulation of oil and gas be
virtually impossible to implement?
Mr. Stewart. At the Federal level, sir?
Mr. Thompson. Yes, sir.
Mr. Stewart. Because there is so much activity happening in
each of the individual states that Federal command and control
run off of Constitution Avenue there in downtown D.C. would not
be able to keep up and manage all the different permits. There
are 144,000 UIC wells operating in the United States to manage,
produce waters from among the 33 producing states. Managing
permitting obligations just for that one small sector of the
industry would overwhelm USEPA, and they know it.
Mr. Thompson. I have a couple questions I want to ask. Some
of the folks that were here and left, these are some of the
claims I hear. Number one, that hydrofracking in particular is
something that is new, that we are experimenting on the
citizens. Can you address that?
Mr. Stewart. There is nothing new about hydraulic
fracturing. The way my father did his first frack job in 1953
is the exact same principle, the frack jobs I did during my
career and are being performed today in the oil and gas
industry. It is simply a matter of taking a hydraulic medium,
fresh water, applying it against the reservoir rock and at a
certain pressure you induce a fracture in the rock creating a
pathway for the oil and gas to more efficiently come into the
wellbore. It is exactly the same process.
We talked about it earlier today, and I think it was maybe
you that mentioned it, the difference is horizontally drilling
laterals. And you said it I think, sir, that you could drill
like 25 vertical wells and come close to achieving the same--
you said it, Mr. Chairman--you can achieve the same process or
you can do it very efficiently by going down, making a lateral,
drilling out 6,000 feet, exposing 6,000 feet of the reservoir
rock to the wellbore and creating, in effect, 25 or 30 wells
inside one wellbore. That is the only difference.
Now the rock doesn't know whether you are going
horizontally or vertically. It has no idea.
Mr. Thompson. If the Chairman will bear with me, just one
other, because these are views that folks have, and I think it
is important to have this debate.
I also hear the claim that why are we doing this when
frankly it had been 152 years since we drilled that first well.
So in 152 years we have essentially exhausted all the oil and
natural gas that is available. That is why we have to move to a
green alternative immediately. I want to get your response to
that. That is a claim I hear.
Mr. Lamborn. Then we have to wrap up.
Mr. Stewart. Mr. Thompson, we are changing that. We are
producing so much natural gas in this country that it is
treated at severe discount to historic values. There is so much
crude oil that is being produced in the Bakken shale that
despite what everybody thinks is a high priced crude oil, it is
traded at a $15 to $17 discount compared to world oil prices.
The United States is always ranked in the top five in oil
and crude oil production and ranked, I think, in the top ten in
oil and gas reserves. What we have done is used technology to
unlock the key to where the bore was actually fed all of the
150 years. We are in a new era.
Mr. Lamborn. OK. Thank you for your responses. I wish we
had more time to ask questions of this panel, but we have a
schedule to keep. Thank you for being here.
I would like to now welcome and invite forward Mr. Ed
Looman, Executive Director of Progress Alliance; Mr. Dennis
Heller, President and CEO of Stephenson Equipment, Inc. and
with Associated Equipment Distributors; Dr. Robert Chase,
Chairman and Professor of the Department of Petroleum
Engineering of Marietta College; Ms. Christine Hughes, Owner of
Village Bakery and Cafe, Della Zona Restaurant, Catalyst Cafe
Bakery--I hope you brought some samples today--and Mr. Nathan
Johnson, Staff Attorney at the Buckeye Forest Council.
Like all of our witnesses, your written testimony will
appear in full in the hearing record, so I ask that you keep
your oral statements to 5 minutes as outlined in our invitation
letter to you and under Committee Rules. The timing lights are
green at first. After 4 minutes they turn yellow, and then
after 5 minutes they turn red.
So we will now go down the line. Thank you all for me being
here and giving us your valuable time.
Mr. Looman?
STATEMENT OF ED LOOMAN, EXECUTIVE DIRECTOR, PROGRESS ALLIANCE
Mr. Looman. Thank you, Mr. Chairman, Congressmen, welcome
to Jefferson County. Eastern Ohio is quickly becoming a
national hub for continued growth and development of the shale
industry. Recent studies have indicated the Utica and Marcellus
shale industry could help create and support more than 200,000
jobs from now until 2015 in Ohio. We could experience an
overall wage and personal income boost of $12 million by 2015.
Additionally, royalty payments to landowners, schools,
businesses and communities could increase to as much as $1.6
billion by 2015. Total tax revenues expected to rise from now
until 2015 and reach roughly $479 billion. Industry
expenditures related to Utica shale alone development could
generate approximately $12.3 billion in gross state product and
result in the statewide output of sales of more than $23
billion.
I believe this data speaks directly to the name of today's
hearing, creating jobs and community growth. This area of Ohio
has been given great geological gifts, and the economic
potential is tremendous. The area you are visiting today has a
very rich history. It once was a sprawling steel making area,
also benefited from years of activity related to the mining of
coal. Since the well documented struggles of the steel industry
began, this area and its hard working people have suffered.
Thousands of good paying jobs that we once had have now
disappeared.
Thus the shale industry represents a major, major
opportunity for Jefferson County and other counties in eastern
Ohio. Some have labeled it as a once in a century opportunity.
Jobs expected to be created will impact generations to come
with new employment opportunities. Already thanks to the shale
industry, we have seen a new wealth created in this area thanks
to royalty payments. Local unemployment rate has fallen nearly
2 percent from 2010 to 2011, again thanks to these new
employment opportunities.
Progress Alliance, I would point out, is the public/private
economic development organization serving Jefferson County. We
are, I am very proud to say, a true public private partnership.
Our funding comes from both government and private business.
The mission of Progress Alliance is three-fold in nature,
attract new jobs in Jefferson County, work with those
outstanding companies we have to keep them here and help them
grow, and market Jefferson County as a great place to live,
work and place.
In recent months the activity level at Progress Alliance
has hit record level. We either have or are working with more
than 35 companies looking to move here as part of the shale
experience. Each prospect tells us the same thing, companies
want to support existing local businesses and hire local
workers.
We are experiencing a time like never before. Attraction
efforts for us have taken on a whole new meaning. Generally
speaking, we had to go out and beat the bushes and now the
bushes are beating us. And we love that kind of mode of
operation. Job creating prospects are stopping by our office on
a regular basis unexpectedly looking for land, looking for a
building to establish operations and looking for opportunities
to hire local workers.
One of the other things you need to understand is that
Jefferson County has taken many steps to prepare itself for
what lies ahead. Our county commissioners have formed an oil
and gas committee designed to address issues related to
communications and education. Eastern Gateway College that you
are visiting today is providing training for our workforce. A
community action commission has developed informational
workshops designed to prepare local workers for opportunities
in the shale industry.
We are also working to improve our services including
possible extension of the runway at our Jefferson County Air
Park to support additional corporate traffic along with the
installation of an automated weather observation system.
My goal today would be to help you understand that the
shale industry represents a major opportunity for this area of
Ohio. It is an opportunity for us to recover, an opportunity
for us to move forward. This energy opportunity does indeed
represent an opportunity to create thousands of jobs and allow
this community and others in shale play to grow. Those of us
living inside this play and those living outside all must
understand that we have a huge opportunity here and one that we
cannot let slip away.
To not totally pursue the opportunity together, to
overregulate this opportunity and to miss this opportunity
would be a major mistake on all of our parts. Thank you very
much.
[The prepared statement of Mr. Looman follows:]
Statement of Ed Looman, Executive Director, Progress Alliance
Eastern Ohio is quickly becoming a national hub for the continued
growth and development of the shale industry.
Recent studies have indicated the Utica and Marcellus shale
industry could help create and support more than 200,000 jobs from now
until 2015. Ohio could experience an overall wage and personal income
boost of $12 billion by 2015 from industry spending.
Additionally, royalty payments to landowners, schools, business and
communities could increase to as much as $1.6 billion by 2015. Total
tax revenue from oil and gas exploration and development in the Utica
shale formation from now until 2015 is projected to be roughly $479
billion. Industry expenditures related to Utica shale development could
generate approximately $12.3 billion in gross state product and result
in a statewide output or sales of more than $23 billion.
The data speaks directly to the name of this hearing: creating jobs
and community growth.'' This area of Ohio has been given great
geological gifts and the economic potential is tremendous.
The area you are visiting today has a very rich history. It once
was a strong steel-making area. It also benefitted from years of
activating related to the mining of coal. Since the well-documented
struggles of the steel industry began, this area and its hard-working
people have suffered. The thousands of good-paying jobs that once were
available have disappeared.
Thus, the shale industry represents a major opportunity for
Jefferson and surrounding counties. Some have labeled it ``a once in a
century opportunity.'' The jobs expected to be created will impact
generations of local residents.
Already, thanks to the shale industry, we have seen new wealth
created in our area thanks to royalty payments. The local unemployment
rate fell nearly 2 percent from 2010 to 2011 thanks to new employment
opportunities.
Progress Alliance, I would point out, is the public-private
economic development organization serving Jefferson County. We are, I
am proud to say, a true public-private partnership. Our funding comes
from both government and private businesses. The mission of Progress
Alliance is three-fold in nature: attract new jobs to Jefferson County,
work to retain those already here and provide assistance when existing
companies look to expand; and market Jefferson County as a great place
to live, work and play.
In recent months, the activity level for the Progress Alliance
staff has hit a record level. We either have or are working with more
than 35 companies looking to move here as part of the shale experience.
Each prospect tell us the same thing: the company wants to support
existing local businesses and hire local workers.
We are experiencing a time like never before. Job-creating
prospects are stopping by on a regular basis, looking for land or a
building to establish a local operation.
You also need to understand that Jefferson County has taken many
steps to prepare itself for what lies ahead. Our county commissioners
have formed an oil and gas committee designed to address issues related
to communication and education. Eastern Gateway Community College is
providing training to our workforce. Our Community Action Commission
has developed informational workshops designed to prepare potential
workers.
Also, the county is working to improve its service, including the
possible extension of the runway at the Jefferson County Airpark and
the installation of an Automated Weather Observation System.
My goal today is help you understand that the shale industry
represents a major opportunity to help this area of Ohio recover and
move forward. Truly, this new energy opportunity does indeed represent
an opportunity to create jobs and allow communities to grow.
Those of living inside this play and those outside all must
understand the opportunity we have. To not totally pursue this
opportunity together, to over-regulate this opportunity and to miss
this opportunity would be a major, major mistake.
______
Mr. Lamborn. Thank you.
Mr. Heller?
STATEMENT OF DENNIS HELLER, PRESIDENT/CEO, STEPHENSON
EQUIPMENT, INC.
Mr. Heller. Good morning, Chairman and Distinguished
Members of this Subcommittee.
It is certainly my pleasure to be here with you both as
President and CEO of Stephenson Equipment. We are a company
that sells and rents construction equipment in Pennsylvania and
New York. We are also as a member of the Associated Equipment
Distributors board of directors.
First I am going to discuss how my company has benefited
from shale energy and the impact that this is having on our
industry and the need for the Federal Government to stay out of
this growing segment. Shale energy has had tremendous growth
potential at our company over the last two years. In fact,
nearly ten percent of my company's 120 employees have positions
directly attributable to the Marcellus shale.
The energy companies that are coming into the state have
invested millions of dollars on roads, road improvement to move
the sand, water, pipe and materials to and from job sites. As a
result, they are renting equipment from Stephenson Equipment.
The next growth segment we have seen is in crane sales. We
are a large dealer of mobile cranes, and we provide sales,
rentals and operator training. An example of that is a crane
that is mounted on a ten-wheel Peterbilt. It is a highly mobile
crane. It sells for about a half a million dollars. We also
sell those. We provide parts and service business for these,
and it has provided tremendous opportunity for my employees.
In 2009 as an example, we would have purchased 17 cranes
for sale and rent. Last year we purchased 55. Again, taking the
ticket price, this is a lot of dollars. To give you a true idea
of the economic impact on our company, we just need to look at
the numbers. In 2010, our revenues were $61.4 million. Last
year we were over $73 million. This growth came from one area,
and that is simple: Marcellus shale.
Stephenson Equipment is not unique to this. In preparation
for this hearing, AED conducted a survey among equipment
dealers in Ohio and Pennsylvania that have play in the energy
segment. Fifteen of the companies surveyed employ more than
3,000 workers. Fourteen of those companies said some portion of
their 2011 revenue was directly or indirectly attributable to
the Marcellus shale. In aggregate, the increase among those
companies was $356 million for a total of $25 million average
increase per company.
Mr. Lamborn. Wow.
Mr. Heller. Several of the companies said that last year
was a record year for them, and that is a stark difference from
our dealers in other areas of the country that do not have
Marcellus or energy play. They are still in a recession or
depression. Past economic data indicates that for every dollar
spent on construction equipment generates $3.19 economic
benefit to the economy. Thus the 2011 shale energy-related
revenues equal about $1.135 billion.
As might be expected, the equipment market is creating and
sustaining many jobs. Most respondents to the survey said about
25 percent of their employment was a direct result of the
Marcellus business, and that currently was about 574 estimated
jobs. The Marcellus business hits every dealer level. It
doesn't matter what type of dealer. We happen to be crane and
road equipment, but you could be selling skid loaders, earth
moving equipment or gloves. You are affected by this industry.
So it is a very far-reaching business, and it has been very
good for our operation in Pennsylvania. And it is not
surprising that equipment dealers in both Pennsylvania and Ohio
overwhelmingly believe that Marcellus shale has the potential
to be an economic game changer in their future.
Comments from the survey respondents specifically on energy
and the development of their companies, the industry, the local
economy can be found in my written testimony. They paint a
dramatic picture and are worth reading.
In conclusion, Mr. Chairman, medium sized companies like
mine are seeing unprecedented growth. We believe policymakers
must protect public health, safety and the environment while
allowing the shale industry to grow and prosper. Furthermore,
bureaucrats in Washington must refrain from regulating this
industry from their desk and allow the state governments to
measure the benefits and impacts of shale energy development. I
appreciate any questions. Thank you for the opportunity to
speak.
[The prepared statement of Mr. Heller follows:]
Statement of Dennis Heller, President and Chief Executive Officer,
Stephenson Equipment, Inc., Harrisburg, Pennsylvania, on Behalf of
Associated Equipment Distributors
Chairman Lamborn, Ranking Member Holt, and other distinguished
members of this subcommittee, my name is Dennis Heller, and it is my
pleasure to appear before you today both as a small business owner,
directly impacted by energy shale development, and in my capacity as a
member of Associated Equipment Distributors (AED) Board of Directors.
I am the president and chief executive officer of Stephenson
Equipment, a company that sells and rents construction equipment and
provides crane service, parts, and operator training at seven locations
in Pennsylvania and New York. Stephenson Equipment has 120 employees.
AED is the trade association representing distributors of
construction, mining, energy, forestry, industrial, and agricultural
equipment. AED has more than 500 members, the overwhelming majority of
which are small businesses. AED's average member achieves about $40
million per year in revenues and employs 80 people.
I appreciate the opportunity to come before the Committee to
discuss how my company is benefiting from shale energy extraction, the
positive impact on the construction equipment industry, the impact on
the broader economy, and guiding principles for policymaking in this
area.
Impact of Shale Energy Development on Stephenson Equipment
Shale energy extraction has resulted in exponential business growth
at Stephenson Equipment over the last two years. In fact, nearly 10
percent of my company's 120 employees have positions directly
attributable to Marcellus Shale energy development.
Stephenson has benefitted on several fronts. Energy companies have
invested substantial resources in building and expanding roads and
highways for hauling sand, water, pipes, and other materials to and
from the Marcellus Shale. Backhoes, pavers, and rollers are working
across northern Pennsylvania providing the infrastructure needed to
transport materials and workers to fracking sites. Additionally,
Stephenson's rentals, part sales, and service calls have grown
substantially.
Perhaps the largest growth is evident in crane sales. Stephenson
Equipment offers a complete line of cranes and operator training. One
of the hottest sellers is a crane mounted on a 10-wheel Peterbilt truck
that is one of the core products used at fracking sites to handle pipe,
coiling, and rig erection. These sell for over $500,000 apiece. The
sale and rental of these cranes, combined with the parts and services
business, has been a boon for my company and its employees. In 2009, we
purchased 17 cranes for sale and rental and two years later, we
purchased 55 cranes for sale and rental. The reason for the jump in
sales is simple--the Marcellus Shale.
To give you an idea of the true economic impact of energy shale
development on Stephenson Equipment, we just need to look at the
numbers. In 2010, my company's revenues were $61.4 million. The
following year, we saw a 16 percent increase in revenues to $73
million. Furthermore, my Pennsylvania locations generate more revenue
and are more profitable than my New York locations because of shale
energy extraction.
Shale Energy's Impact on the Construction Equipment Industry
Stephenson Equipment is not unique in having been positively
impacted by the shale energy boom in the region. In preparation for
this hearing, AED conducted a survey of its members in Ohio and
Pennsylvania with operations in the Marcellus and Utica shale regions.
The results provide a compelling snapshot of the impact that shale
energy development is having on the equipment industry. Note however
that the results discussed below only capture the impact on companies
that participated in the survey and AED has not sought to project
results across its broader membership.
Fifteen equipment companies with combined employment of 3,176
workers responded to AED's online survey, which was conducted between
Feb. 17 and Feb. 22. Fourteen companies (93 percent of respondents)
said some portion of their 2011 revenues was directly or indirectly
derived from shale energy development. The total aggregate revenue from
that activity for all respondents in 2011 was $356 million. The average
shale energy-related revenue was $25.4 million per company.
Anecdotally, several responding companies reported that 2011 was a
record year in an industry that is still in a depression in other parts
of the country where shale energy is not a market factor.
A 2008 economic study by Professor Stephen Fuller at George Mason
University in Fairfax, Virginia estimated that, ``[e]very dollar of
direct spending for the purchase of heavy construction equipment
generates a total of $3.19 in economic impact--one dollar of direct
spending and $2.19 in indirect and induced economic activity from the
re-spending in other sectors of the national economy of monies paid to
equipment distributors.'' Thus, AED estimates the total economic impact
of the aggregate revenues from shale energy activity reported by
Pennsylvania and Ohio survey respondents at $1.135 billion.
As might be expected, the equipment market activity is creating and
sustaining many jobs. Survey respondents directly or indirectly
supporting the shale energy industry report that an average of 24.7
percent of their workforce in Ohio and/or Pennsylvania is attributable
to that activity. AED calculates that shale energy is supporting 574
jobs at the equipment distribution companies that responded to the
survey.
According to survey participants, the shale energy industry and
businesses that support it are utilizing the full range of equipment
AED members sell, rent, lease, and service. Every segment of the dealer
universe is being touched by shale energy; distributors who specialize
in small equipment, such as skid steer loaders, and in specialty
products are just as likely to benefit as dealers who sell heavy
earthmoving equipment.
Not surprisingly, equipment distributors in Ohio and Pennsylvania
overwhelmingly believe that the shale energy sector has the potential
to be an economic game changer for the industry. Eighty-seven percent
of survey respondents said that if the shale energy sector continues to
grow, it will have a significant and positive impact on their
companies, allowing them to expand and add new workers. Thirteen
percent said they expect the shale energy sector to have some impact
but that it would not be a significant factor in their future success.
It is notable that not a single respondent said they did not expect
shale energy to have at least some positive impact on their company in
the years ahead.
In addition to providing objective data, Pennsylvania and Ohio
construction equipment distributors responding to the survey made the
following comments about the impact of shale energy development on
their companies, the industry, and the economy as a whole:
``In 2011 alone our company hired 100 new people to
serve this market which we have only been involved with for two
and half years.''
``[Shale energy development has led to] the only
growth of new jobs in western Pennsylvania since steel and
other mills left in the 80's.''
``The shale gas industry has created many new job
positions and will continue new jobs as we grow this segment.
The contractors performing the work have been very responsible
and very good to the local economy and Pennsylvania businesses.
We are pleased with the care [with which] they manage job site
safety, security and concern to protect the environment. Based
on the shale market, we see future growth for our company
combined with our suppliers.''
``[Our company] conducts business in the eastern
Pennsylvania areas. To date we have not directly felt the shale
energy impact although we feel strongly that if allowed to
continue and/or to expand, either a direct impact or strong
positive indirect impact will be felt by our company by way of
rentals or sale of equipment.''
``We are seeing activity from the people getting
royalty checks, the drilling companies and their contractors.
The bigger potential long term impact is on people supporting
those activities in hotels, restaurants, housing and other
related businesses. We expect this to continue to grow IF the
political environment allows that to happen.''
``If shale energy exploration is allowed to progress,
the only unemployment we should see in Pennsylvania or Ohio
will be those who do not want to work. Besides the temporary
jobs created from drilling and pipeline work, permanent jobs
will be created from proposed cracker plants and refineries.
Safe exploration practices should be emphasized, but not at the
expense of progress.''
``The shale energy sector is having a profound effect
on my company. We are currently reorganizing our internal
structure and facilities to accommodate the projected increase
in business. After what our business has been through over the
past several years in this challenged economy, Marcellus Shale
is a needed shot in the arm. In addition to projected revenues
of $1.5 million in 2012 from the shale sector, we are currently
projecting capital expenditures for tooling and equipment in
excess of $1 million in order to position our company for
future years in the Marcellus Shale play areas. The road to
Marcellus Shale is paved with gold for all involved if our
leaders do not get in the way!''
``While driving demand for some of our products
upward, it is also affecting the availability of skilled
service technicians and mechanics. While such a scarcity is a
negative in the short run, in the long term it increases the
need for skilled workers and drives both employment and
wages.''
``The developing shale gas opportunity in Ohio and
Pennsylvania is increasing business activity and demand for
construction products in all facets of our business--parts,
service and sales. This positive impact will continue with
direct benefits as long as well-sites and pipelines are
constructed, and with continuing indirect benefits from the
economic prosperity that results in infrastructure and
commercial growth.''
``We have been anticipating an increase in our shale
play related business for about nine months, and this business
began growing for us in the fourth quarter of 2011. Over the
next three to five years, we expect this business to grow
exponentially, and we expect the business to be very demanding
and very profitable. We have now dedicated two individuals
full-time to manage old and new customer relationships, and we
are developing expectations, procedures and systems internally
to support this growing business segment. Much of the business
will be rental, though we have sales opportunities associated
with [original equipment manufacturers] that are providing
equipment to the firms who are focusing on the shale play.
Servicing the customer is our #1 priority, on their terms,
which are different and/or more demanding than the average
customer's. Risks do exist for us in this business, pertaining
to how much inventory and how many personnel we dedicate to
this business. Overall, we are thankful to see this business
opportunity in Ohio, and we are hopeful that excessive
regulation doesn't choke it off before we and the State of Ohio
capitalize on the opportunities.''
The Entire U.S. Economy Benefits from Shale Energy
The entire U.S. economy is reaping the economic benefits from
energy shale development. According to an IHS Global Insight study
prepared for the America's Natural Gas Alliance, the shale gas
contribution to Gross Domestic Product (GDP) was more than $76 billion
in 2010. Assuming Congress permits shale energy development to
continue, projections show this sector increasing to $118 billion by
2015, and tripling to $231 billion in 2035.
Additionally, the shale gas industry is creating a significant
number of jobs. According to the same study, in 2010, shale gas
supported over 600,000 jobs, which included 148,000 direct jobs in this
country, nearly 194,000 indirect jobs in supplying industries, and more
than 259,000 induced jobs. Over 63,000 of these jobs were in the
construction sector, one of the hardest hit by the recession.
Importantly, with all levels of government struggling to generate
revenues, IHS Global Insights found that in 2010 shale gas production
contributed $18.6 billion in federal, state, and local government tax
and federal royalty revenues. By 2035, these receipts will more than
triple to just over $57 billion. On a cumulative basis, the shale
industry will generate more than $933 billion in federal, state, and
local tax and royalty revenues over the next 25 years.
The Federal Government Should Stay Out of the Way
The economic and job creation benefits of energy shale development
are clear. However, in order for the economy to reap the full reward
from shale energy, the federal government must refrain from
micromanaging the industry and defer to state regulators. It is AED's
position that:
Advancing technologies in horizontal drilling and
hydraulic fracturing have made possible production of vast and
previously unavailable reserves of natural gas and oil from
shale. This has created hundreds of thousands of jobs, enhanced
energy security, spurred economic growth, improved
manufacturing competitiveness, and lowered the cost of energy
to consumers. Public policy should facilitate and encourage
continued development to the greatest extent possible.
Other new methods of extracting oil and gas from
shale should be pursued with continued aggressive research and
development, and when economically viable, production.
Balanced regulation is necessary to protect public
health and the environment, while encouraging innovation and
expansion in the shale energy industry.
The benefits and impacts of shale energy development
are best measured and understood at the state level. It should
therefore continue to be regulated locally and not by the
federal government.
Conclusions
The shale energy sector is flourishing and many sectors of the
economy are reaping the economic benefits. The small companies that
comprise the construction equipment industry, such as Stephenson
Equipment, are seeing unprecedented growth directly resulting from
shale energy development. However, imprudent government action could
undermine the viability of this sector.
Policymakers must protect public health, safety, and the
environment, while allowing the shale energy sector to continue to grow
and prosper. Furthermore, bureaucrats in Washington must refrain from
regulating the industry from their desks in the nation's capital and
allow state governments to measure the benefits and impacts of shale
energy development.
______
Mr. Lamborn. OK. Thank you.
Dr. Chase?
STATEMENT OF ROBERT CHASE, CHAIRMAN/PROFESSOR OF THE DEPARTMENT
OF PETROLEUM ENGINEERING, MARIETTA COLLEGE
Dr. Chase. Thank you, Chairman Lamborn, Congressman
Johnson, Congressman Thompson. I am honored to be asked to
testify before you today regarding the impact natural gas can
have on America's future.
I have been serving as the Chairman of the Department of
Petroleum Engineering and Geology at Marietta College for the
last 35 years. I have had close to a thousand students go
through my program and take their place in industry all over
the globe. My students now numbering 300, nearly 300 in the
petroleum engineering program and 49 in the geology program
come primarily from Ohio, Pennsylvania and West Virginia. I
also have students from all around the country and the world,
including Saudi Arabia, Kuwait, China and Africa.
We offer only an undergraduate program and BS degree in
petroleum engineering at Marietta College, but we are the only
small private liberal arts college in the Nation to offer this
unique major. This year I have had over 20 companies on campus
recruiting my seniors for permanent jobs and my underclassmen
for summer internships. Our graduates are in high demand. The
manpower demand won't stop with just engineers and geologists,
however.
I have been working closely with Washington State Community
College and the Washington Career Center in an effort to help
them prepare curricula that will educate and train technicians
and field personnel that the industry will require going
forward. Several other technical colleges around the state are
also preparing tracks of study for their students that will
prepare them for jobs in our industry as well.
I have been teaching courses in natural gas engineering for
37 years. My Master's and Ph.D. research were focused on gas
storage and producing methane from coal respectively. By the
way, all three degrees are from Penn State. I have had research
contracts with the Department of Energy and the Gas Research
Institute in Chicago, with all of my research being focused on
natural gas engineering topics.
While we knew we had vast resources of natural gas in coal
and shale back in the '70s, we just did not have the technology
necessary to free that resource from the very low permeability
or tight reservoir rocks. The natural gas trapped into those
rocks was uneconomical to recover because technology had not
been developed yet to get that gas out of the rocks, but things
have changed dramatically in the U.S. in just the last ten
years. Advances in horizontal drilling that had been
traditionally employed mainly in offshore environments and
multistate fracturing have opened up vast untapped resources of
natural gas and oil in shale formations like the Marcellus and
Utica.
The recent study released by U.S. Energy Information Agency
revised the unproved technically recoverable reserves of
natural gas in the Marcellus shale down to 141 trillion cubic
feet. That 42 percent revision downward means that the
Marcellus still has the potential to meet the nation's entire
natural gas needs for the next seven years. Just 15 or so years
ago the nation's total proven natural gas reserves were only
200 trillion cubic feet. We have come a long way. Now one
formation alone in the back yard of Appalachia boasts the same
reserves.
The Utica shale is in its infancy of development, and its
recoverable reserve potential cannot be estimated with any
accuracy yet, but one thing is known: Some of America's largest
oil and gas companies have wagered billions of dollars and
placed it in the hands of landowners. Companies have leased
over 4 million acres of land in Ohio with the expectation of
producing both gas and especially oil in commercial quantities.
There is a lot to be said about contamination, that we hear
about contamination of groundwater, and Tom Stewart addressed a
number of the issues that I thought were very important. And I
would just like to say a few things about that.
Along with the development of our shale resources comes the
necessity to care for the environment. Thanks to movies like
Gas Land that are rooted more in fiction than fact, the public
has been polarized against the process of hydraulic fracturing
which is an absolute necessity in the process of extracting gas
and oil from tight shale formations. Over a million wells have
been fracked in the U.S. since the 1940s and over 60,000 wells
in Ohio alone. There are no data to substantiate the claims
made in Gas Land that hydraulic fracturing contaminates
groundwater.
In fact, a recent study just released by the University of
Texas affirms the fact that fracking does not contaminate
groundwater. In another paper published by George E. King of
Apache Corporation through the Society of Petroleum Engineers,
King estimates that in a worst case scenario, that the odds of
a hydraulic fracture treatment in a formation less than 2,000
feet deep penetrating a fault that extends back to the surface
are one in 200,000. He estimates the chance of this happening
in a strata deeper than 2,000 feet being zero. Thank you.
[The prepared statement of Dr. Chase follows:]
Statement of Dr. Robert W. Chase, Marietta College,
Department of Petroleum Engineering and Geology
Chairman Lamborn, Congressman Johnson, Congressman Thompson,
guests, I am honored to be asked to testify before you today regarding
the impact that natural gas can have on America's future.
I have been serving as the chair of the Department of Petroleum
Engineering and Geology at Marietta College for the last 35 years. I
have had close to 1,000 students go through my program and take their
place in industry all over the globe. My students, now numbering nearly
300 in the petroleum engineering program and 48 in the geology program,
come primarily from Ohio, Pennsylvania and West Virginia. I also have
students from all around the country and the world, including Saudi
Arabia, Kuwait, China, and Africa. We offer only an undergraduate
program and B.S. degree in petroleum engineering at Marietta College
and we are the only small, private liberal arts college in the nation
to offer this unique major. This year I have had over 20 companies on
campus recruiting my seniors for permanent jobs and my underclassmen
for summer internships. Our graduates are in high demand.
The manpower demand won't stop with just engineers and geologists
however. I have been working closely with Washington State Community
College and the Washington County Career Center in an effort to help
them prepare curricula that will educate and train technicians and
field personnel that the industry will require going forward. Several
other technical colleges around the state are also preparing tracts of
study for their students that will prepare them for jobs in our
industry as well.
I have been teaching courses in natural gas engineering for 37
years. My masters and PhD research were focused on gas storage
operations and producing methane from coal, respectively. I have had
research contracts with the Department of Energy and the Gas Research
Institute in Chicago, with all of my research being focused on natural
gas engineering topics. I was, in fact, way ahead of my time with my
research focused on gas production from coal seams and the Devonian
shale formation back in the mid-1970's. While we knew we had vast
resources of natural gas in coal and shale back in the `70's, we just
did not have the technology necessary to free that resource from the
very low permeability (or tight) reservoir rocks. The natural gas
trapped in those rocks was uneconomical to recover because technology
had not been developed to get that gas out of the rock formations.
But things have changed dramatically in the U.S. just in the last
ten years. Advances in horizontal drilling that had been traditionally
employed mainly in offshore environments and multi-stage fracturing
have opened up vast untapped resources of natural gas and oil in shale
formations such as the Marcellus and Utica-Point Pleasant shales.
A study recently released by the U.S. Energy Information Agency
revised the unproved technically recoverable reserves of natural gas in
the Marcellus shale down to 141 Tcf of gas. The 42% downward revision
still means that the Marcellus has the potential to meet the nation's
entire natural gas needs for seven years. Just fifteen or so years ago,
the nation boasted total proven recoverable natural gas reserves of
only 200 Tcf. Now one formation alone in the backyard of Appalachia
boasts approximately the same.
The Utica shale is in its infancy of development and its
recoverable reserve potential cannot yet be estimated with any
accuracy, but one thing is known--some of America's largest oil and gas
companies have wagered several billion dollars and placed it in the
hands of landowners. Companies have leased nearly 4 million acres of
land in Ohio with the expectation of producing both gas and especially
oil in commercial quantities.
The relatively low current price for natural gas is obviously great
for consumers, but makes it difficult for companies to justify spending
$5-6 million dollars to drill and complete gas wells. Consequently,
companies have focused their attention on other shale formations like
the Eagle Ford, Niobrara, Bakken, and now the Utica that produce oil
along with natural gas.
The nearly 4 million acres of land that have been leased in Ohio
potentially represent 25,000 horizontal wells that could be drilled in
the state for a total investment of nearly $125 billion over the next
20 to 25 years. It is estimated that the number of horizontal wells
drilled will rise from 11 last year to over 130 this year and over
1,000 a year by 2013 if the resource potential proves true. The surge
in drilling activity should result in a significant drop in the
unemployment rate in Ohio thanks to the creation of good paying jobs in
the petroleum industry and all areas that support it. Job growth across
all sectors will likely come in between 65,000 and 200,000 by the year
2014 as estimated by recent economic impact studies supported by the
Ohio Chamber of Commerce and the Ohio Oil and Gas Association Energy
Education Program.
Thanks to our newfound ability to extract oil and gas from shale,
U.S. and Canadian oil production is expected to grow by more than 3.1
million barrels per day (BPD), reaching 12.1 million BPD and surpassing
the record of 11.2 million BPD set in 1973, according to BENTEK Energy
LLC. U.S. imports of foreign oil will fall more than 40% by 2016
according to their study.
The Boone Pickens' Plan for conversion of our nation's truck fleet
to natural gas along with the construction of more natural gas-burning
power plants have the potential to reduce green house gas emissions
significantly and take advantage of the cheapest and the second most
abundant fossil fuel, next to coal, in the nation. America has the
potential to reduce its imports of foreign oil even more if it
institutes a plan like Pickens'. With our abundant sources of natural
gas, we could even become a net energy exporter.
Along with the development of our shale resources comes the
necessity to care for the environment. Thanks to movies like Gas Land
that are rooted more in fiction than fact, the public has been
polarized against the process of hydraulic fracturing which is an
absolute necessity in the process of extracting gas and oil from tight
shale formations. Over a million wells have been fraced in the U.S.
since the late 1940's, and over 60,000 wells in Ohio alone. There are
no data to substantiate the claims made in Gas Land that hydraulic
fracturing contaminates groundwater. In fact, a recent study released
by the University of Texas affirms the fact that fracing does not
contaminate groundwater.
In another technical paper published by George E. King of Apache
Corporation through the Society of Petroleum Engineers, King estimates,
in a worst case scenario, that the odds of a hydraulic fracture
treatment in a formation less than 2,000 ft deep penetrating a fault
that extends back to the surface at 1 in 200,000. He estimates the
chance of this happening in a stratum deeper than 2,000 feet as being
zero.
The key to ensuring that there is no contamination of the ground
water lies in proper well construction. Multiple strings of casing
properly cemented back to the surface can and do eliminate the
possibility of frac water from entering fresh water aquifers. Most, if
not all, of the companies drilling wells in Ohio exceed Ohio
regulations with regard to well construction and cementing practices. A
typical well diagram is shown as Attachment 1 to this testimony. In the
diagram, it can be seen that there are actually four strings of casing
and two layers of cement protecting the fresh water aquifer. And with
the depth of the wells at 6,000 to as much as 9,000 ft, the odds of an
induced hydraulic fracture growing back to the surface are essentially
zero.
Oil and gas companies, the Department of Natural Resources, the EPA
and other related agencies must cooperate to ensure that well design,
construction and cementing procedures ensure that the public water
supply is protected. At the same time, the public must be informed of
the actions taken by these groups to protect the water supply so that
fear is not allowed to be spread by groups that believe America's
energy shouldn't come from their backyard.
In the United States today we have an opportunity at hand to
significantly lessen our dependence on foreign oil while growing our
economy with good paying jobs. We can develop our vast oil and gas
resources in the shale while simultaneously protecting the environment
if all entities involved, both on the extraction side and the
environmental side, work together and not in juxtaposition to each
other.
Thank you again for giving me the opportunity to appear here today.
I'll be happy to answer any questions you might have.
[GRAPHIC] [TIFF OMITTED] T3226.004
Mr. Lamborn. OK. Thank you.
Ms. Hughes?
STATEMENT OF CHRISTINE HUGHES, OWNER, VILLAGE BAKERY AND CAFE,
DELLA ZONA RESTAURANT, CATALYST CAFE BAKERY
Ms. Hughes. Thank you. My name is Christine Hughes. My
partner and I own three food businesses including Della Zona,
which means from the region.
For ten years we have made food from locally grown
ingredients to sell and feed to our staff of 25. I am concerned
that shale drilling is moving into land surrounding the city
because that is where our food is grown and that is where my
farming friends make their living, from the land.
We buy from over 30 local food producers. At least 70 jobs
are directly affected by my business. Dozens more local food
producers sell at the nationally renowned Atkins Farmers
Market.
Our tourism bureau created Atkins 30-Mile Meal Project to
increase local food use and promote tourism. The 147 partners
include farms, restaurants and farmers markets. We are a
national resource for regions seeking to develop and build
their local food economy. Today we have laid the foundation for
our sustainable economy by creating a resilient local food
system, but this year shale drilling has been escorted onto our
land against our will.
In Athens County several hundreds of oil and gas leases are
under contract to be drilled. We have Class II injection wells,
and the volume of fracking wastewater trucked in and injected
under our land will increase exponentially. Awareness is
growing here about the health effects of living near shale
drilling. Last month the American Lung Association stated, ``We
believe there is a very real and unacceptable risk that the air
emissions will make people sick and shorten the lives of those
living in communities where the extraction will take place.''
The speed and forcefulness of shale development impels us to
protect ourselves.
In Athens we have conducted extensive baseline water
testing results. Our chapter of Ohio Ecological Food and
Farming Association passed a resolution opposing horizontal
fracking. Patriotic Ohioans are asking why landowners who don't
want drilling are subject to it through eminent domain by
multinational companies who sell our oil and gas to other
countries. No one has done a study to find out the economic
impact of devastating this local food economy, taking away the
livelihood of the 70 people my business relies on and shutting
down the small farms that serve hundreds of people connected in
this way. We don't want to lose our jobs.
Three percent of the households in my county have signed
leases that will allow drilling activity on half the land in
our county. None of my suppliers have signed, but many are
surrounded by land that is leased.
Ohio University and all other public land is also available
to drill on including Wayne National Forest. Civic leaders
spoke in opposition to shale drilling being permitted in the
Wayne. The risk to our water supply, community health and local
economy could not be supported. The drilling company that got
Athens landowners to sign was dishonest with lessors telling
them they do not use chemicals to frack. Shareholders of oil
and gas companies are treated with more respect and honesty
than the landowners are. Shareholders are required to be told
the risks of drilling while the lessor is not.
The failure to oversee drilling on public land and the
absence of punitive fines for violators give us no confidence
that the farmers' health and environment will be protected.
Local farmers tell me about their concerns. Integration Acres
raises 50 milking goats on a 30-acre pasture. Their neighbor
signed a lease for fracking and is eager to host a compressive
station at the far end of his property.
Lynn Scott's third generation farmers are struck with grief
that their neighbors have signed. More than one local lease
signer has said, ``If the drilling gets bad, I can take the
money and move to Florida.'' The family next door will live
with the effects. Angie Starline tells us ``I am not interested
in feeding our customers food from a contaminated industrial
zone.'' Their investment will be lost if they must abandon
their land. ``We do not want to lease our land for the Utica
shale'' says Neil Cherry, Cherry Orchards. His neighbors have
leased. ``How will we be able to pass our family farm onto our
children?''
Neighbors are now pitted against each other each standing
by his right to earn a living from his land.
I cannot imagine a better plan to rip apart a close
community than this oil and gas rush. The jobs displaced by
drilling are not accounted for, not even mentioned. Sustainable
small scale farm businesses already supported by the people of
Southeast Ohio and our success can be duplicated across the
state and country to increase our security and reduce our need
for fossil fuels.
In sustainable food producing regions, the largest buyers
of local food have written that they will not purchase food
from land surrounded by industrial production for oil and gas.
What will happen to Ohio's farmers? Who will grow our food?
These farmers I work with are practical visionaries who have
built a strong food economy for 40 years.
I testify today to protect my friends and our livelihoods
from being destroyed. Protecting farmland from fracking is
vital for a productive economy now and after fossil fuels are
history. Thank you.
[The prepared statement of Ms. Hughes follows:]
Statement of Christine T. Hughes, Owner of Village Bakery,
Della Zona, and Catalyst Cafe
Distinguished members of the committee:
Thank you for convening this hearing on a topic that is of urgent
concern to all Ohioans. I would like to present a business perspective
in the hope that it may illustrate how shale development is currently
impacting my business network in Athens, Ohio.
My name is Christine Hughes. My partner and I own 3 food businesses
in Athens--Village Bakery, Catalyst Cafe, and Della Zona--which means
``from the region'' in Italian. We currently have 25 employees. We make
food from locally grown ingredients to sell to our neighbors, to Athens
visitors, and to feed our staff. I've been concerned for some time now
about the shale drilling industry moving in to land surrounding the
city, because that's where our food is grown, and that's where my
farming friends make their living.
I want to briefly tell you about some of the people I've done
business with for more than 10 years. Some of the checks I write over
the course of the week are for:
High Bottom Farm eggs,
Laurel Valley Creamery cheese,
King Family Farm poultry,
Harmony Hollow Farm pork,
Sassafras Farm spinach,
Shagbark Seed and Mill corn,
Cherry and Shews Orchards fruit,
Cantrell honey,
Shade River Farm onions,
Rich Gardens garlic,
Green Edge Gardens lettuce,
Starline Organics flour,
Snowville Creamery milk,
Sticky Pete's maple syrup,
and several other local food producers. And this is in
February.
These checks represent real local businesses, most with additional
employees--the larger ones have 12-15 full time employees. At least 70
jobs are directly affected by my business.
There are many dozens more local food producers at the thriving
Athens Farmers Market, which is nationally known, and has a 2-year
waiting list for vendors.
Some of our local producers have grown to be able to sell to Giant
Eagle and Whole Foods, in larger cities including Columbus and
Washington DC.
These farmers and producers raise food in a way that ensures that
future generations will also be able to produce clean, healthy food.
And they teach younger generations how to farm, and how to produce food
for their families and communities.
Two years ago the Athens 30 Mile Meal Project began, to increase
local food use and promote tourism around local food. This year there
are 147 partners in the program (up 68% since August 2011) including
farms, CSAs, eateries committed to local sourcing, specialty food
producers, and farmers markets.
This year 30 MM will become a national resource for regions seeking
to develop and build their local foods economies, promoting the region
to travelers interested in experiencing our vibrant local foods
experience, resulting in additional demand for hotel rooms, meals, as
well as lodging tax revenues.
Together, we have laid the foundation for a sustainable economy by
creating a resilient local food system. Resilient, unless, of course, a
toxic, poorly regulated industry, funded by unprecedented international
speculative investment is escorted into our land, against our will.
Small-scale agriculture in Southeast Ohio is about to be terminated by
a short-term energy ``boom'' that is being forced on citizens, 72
percent of whom, despite their hopefulness about economic benefits,
want shale drilling stopped until further studies can be completed on
it's potential impacts.
So far in Athens County there have been no wells drilled yet for
this new kind of high volume, deep shale, slick water, horizontal
fracturing, but several hundred oil and gas leases are under contract
to be drilled, beginning this spring according to one drilling company.
We do have 4 class 2 injection wells, 2 of which are actively receiving
truckloads of waste water from frack jobs in PA, WV, and North of us in
Ohio. One of these is just outside Athens City and close to the Hocking
River. With the increase of shale drilling endorsed by our State and
Federal governments, Ohio can expect to see the volume of fracking
waste water trucked in and injected under our land to increase
exponentially.
Awareness is growing here about the health effects of living near
shale drilling operations. A statement last month from the American
Lung Association regarding shale development in New York is one that
should apply to Ohio as well. The statement reads in part: ``We believe
that there is a very real and unacceptable risk that the air emissions
will make people sick and shorten the lives of those living in the
communities where the extraction will take place.'' The speed and
forcefulness of shale development has sparked a growing movement to
prevent damage from drilling.
In Athens County, watershed scientists, landowners and dozens of
volunteers are working together with an EPA certified lab to gather
extensive baseline water testing results. Our local chapter of Ohio
Ecological Food and Farming Association has unanimously passed a
resolution opposing horizontal fracking because they ``believe it is
imperative to maintain and expand our local food economy that is energy
efficient and ecologically responsible.'' Patriotic Ohioans are asking
why local control has been stolen from us, and why landowners who don't
want the drilling are subjected to it anyway through eminent domain--by
multinational companies who are selling the oil and gas to other
countries!
Ohioans want to work, and those who are working in our vibrant
local food system don't want to lose our jobs. No one has done a study
to find out the economic impact of devastating this local food economy:
taking away the livelihood of the 70 people my business relies on and
shutting down the small farms that serve hundreds of people connected
in this web.
Shale drilling and the disposal of its waste products are an
imminent threat to my livelihood and others who make a living from
using our environment responsibly to feed ourselves. Three percent of
the households in my county have signed leases that will allow drilling
activity on over 50 percent of the land in our county. None of my
suppliers have signed a lease, but many are surrounded by land that is
leased. Ohio University and all other public land is also available to
drill on, including Ohio's only federal forest land, which is Wayne
National Forest. Civic leaders and officials, alerted by a citizen to
the BLM auction at the last minute, spoke clearly in opposition to
shale drilling being permitted in the Wayne, on public land, because of
the risk to aquifers that supply the City of Athens. The ``risk to our
water supply, community health and local economy'' from a practice that
is ``not strictly regulated and highly accountable'' could not be
supported by the Athens Wellhead Protection team.
The company that got all the local landowners to sign was dishonest
with potential lessors, telling them they do not use chemicals to
frack, and that they filter the flowback water to put it back into the
drinking supply. They offered tiny per-acre sums to naive landowners
though the value of the minerals was already in the thousands.
Landowners who resisted signing were told by their neighbors that if
they didn't sign, the company would drill under their property
horizontally to extract minerals from them. Shareholders of oil and gas
companies are treated with more respect and honesty than the landowners
are--the shareholders are required to be told the risks of drilling,
while the lessor is not.
Citizen concerns about safety and health have not been fully
addressed by authorities. The failure to oversee drilling on public
lands, and the absence of punitive fines for violators does not give me
confidence that our farmers' health and environment will be protected
from the industry's activities. In Ohio, regulations for well-siting
and gas flaring for farming areas are weaker than for urban areas.
As the industry gets ready to move forward, many local farmers are
trying to figure out what they will do. A handful of examples might
give you an idea of their dilemma:
Integration Acres is run by a young family who raise 50 milking
does for cheesemaking on a 30 acre pasture. Their neighbor, a wealthy
excavator with lots of acreage, has signed a lease for fracking and is
eager to place the compressor station at the far end of his property,
next to another neighbor who lives on a tiny strip of land in a
dilapidated trailer.
``We do not want to lease our land for the Utica Shale,'' says
Neil Cherry of Cherry Orchards, whose neighbors have leased to
drillers. ``How will we be able to pass our family farm to our
children? What should we do now to protect our family and our
land?''
Kale and Melanie Linscott, a young, hardworking couple who grow
organic vegetables on land that's been in the Linscott family for
generations, are struck with grief that their neighbors who own land
but do not farm have signed. More than one local lease signer has said,
``if the drilling gets bad, I can take the money and move to Florida.''
That leaves the family next door to live with the effects of drilling.
Angie Starline, of Starline Organics, whose farm is adjacent to the
Hocking River, and next to an active class II injection well receiving
frack waste water, tells us, ``I am not interested in feeding our
customers food from a contaminated industrial zone.'' She and her
husband have invested a lot in their farm, money that they will not be
able to recoup if they must abandon their land.
Neighbors, even relatives, who have peacefully coexisted for years
are now pitted against each other, each standing by his right to earn a
living from his land. I cannot imagine a better plan to rip apart a
close community than this oil and gas rush, as it is affects our
farmers and customers.
This is a massive transfer of wealth--the wealth of our air, our
land, our water, our infrastructure of interdependent small businesses.
All these are being sacrificed, not for the good of our country, not
for the well being of the people, but to ensure the profit of a few
multinational corporations. Every citizen prefers clean air to breathe
and clean water to drink. And most of us want jobs that preserve the
highest health and environmental standards for all. We need Local,
State, and National leaders who have both the will and the authority to
uphold these standards.
No, this is not about reducing our dependence on foreign oil,
creating permanent jobs, or making ourselves safe. The climate change
denialists are hand in hand with politicians who tell us wars in the
Middle East are not about oil, and then in the next breath that
extracting that last drop of oil from under our land will keep us from
war, make us independent, and keep our energy costs low. The jobs
displaced by drilling are not accounted for, not even mentioned in the
promise of Ohio's fossil-fuel-funded future.
If you, our elected representatives, are truly interested in
securing long-term jobs and energy supplies for the future of our
country, then please put these several facts on the same page for a
minute: Deep shale hydraulic fracturing in the U.S. could provide our
energy for up to 100 years. According to research out this month from
National Oceanic and Atmospheric Administration, methane leaking from
fracking gas fields is far greater (from 2.3-7.7%) than previously
reported (1.6%). Methane contributes to increased temperatures on
Earth--that includes our country, by the way. The International Energy
Agency's latest report projects that 2017 will be the year we surpass
the level of global warming safety. 2017--five years from today, at
current levels of fossil fuel use. At the end of 2011, the U.S.
Department of Energy reported that levels of greenhouse gasses are
higher than the worst-case scenario anticipated just four years ago.
From what science and reality are showing us, our whole planet will
be cooked long before that century of shale fuel can be used up. So,
yes, fracking can fuel our future--as long as we don't mind measuring
our future in seasons rather than in decades.
For jobs that can last more than a decade, that can help us rebuild
our economy, sustainable small-scale farming, smart building and
retrofitting, low-impact tourism and renewable energy are all worthy of
your support. These are the businesses that already support the people
of Southeast Ohio, and their success can be duplicated across the
country, increasing our security by lessening our need for fossil
fuels.
Where fracking has threatened to move in, in other sustainable
food-producing regions such as New York, the largest buyers of local
food have written statements that they will not purchase food from land
surrounded by industrial production of oil and gas. What will happen to
Ohio's farmers? Who will grow our food?
These people I describe, with businesses they give their lives to,
are practical visionaries who have built a sustainable food system over
the last 40 years, with the knowledge that fossil fuels would not last
forever. I will do everything in my power to protect my friends and our
livelihoods from being destroyed. What will you do to help us? If we do
not protect our farmland from fracking, we will eliminate the very
infrastructure that can survive and the very teachers that will help us
all learn to thrive after this brief era of fossil fuel burning is
history.
______
Mr. Lamborn. OK. Thank you.
Mr. Johnson?
STATEMENT OF NATHAN JOHNSON, STAFF ATTORNEY, BUCKEYE FOREST
COUNCIL
Mr. Nathan Johnson. Chairman Lamborn, Mr. Johnson and Mr.
Thompson, thank you and good morning.
My name is Nathan Johnson. I am a staff attorney for the
Buckeye Forest Council. We are a 501(c)(3) public interest
group. The Buckeye Forest Council is a membership-based
grassroots organization dedicated to protecting Ohio's native
forests and their inhabitants. I am here today to remark on the
need for adequate analysis of deep shale development of Ohio's
public lands and for adequate health and environmental safety
standards regarding the same.
Ohioans want jobs, but we want healthy families and a clean
environment, too. There is nothing incompatible about jobs and
adequate protection. Unfortunately though we do not have
adequate protection at this time in Ohio. Ohio currently lacks
adequate health and safety standards to protect the public and
their land from potential water, soil and air pollution
generated by a rapidly growing shale industry in the state.
For example, Ohio law does not require any predrilling
water testing or water monitoring of monitor wells in rural
areas prior to drilling. Ohio law allows shale gas drilling
sites to store toxic wastewater in open pits with no fencing.
These pits attract and kill wildlife including large numbers of
bats and birds. In fact, in 2010 one of these open air storage
pit leaked and spilled 1.5 million gallons of toxic oil and gas
wastewater onto land in Ohio. Nothing in Ohio law prevents the
burial of contaminated drill cuttings on site. Ohio law allows
highly toxic oil and gas field waste to be spread on community
roads for dust and ice control.
Ohio is seventh in the Nation in population, but a mere
47th in public land available per capita. The Wayne National
Forest, of which large portions are located in Athens County,
is Ohio's only national forest. This past October the Buckeye
Forest Council formally protested the Bureau of Land
Management's proposed lease sale of 3,302 acres in the Wayne
National Forest for oil and gas drilling. Joining us in the
protest of the sale were the Athens City Council, Athens City
Government, Athens County commissioners, Ohio University, the
Burr Oak Regional Water District, several other organizations
and many local residents. A copy of BFC's formal protest has
been submitted to the Subcommittee.
From Buckeye Forest Council's perspective, the reasons for
a formal protest were simple. Some of the flaws in Ohio's
regulatory structure have already been noted. Moreover, the
Forest Service and the BLM would have violated Federal law had
the sale proceeded. Federal law requires that both Forest
Service and BLM rely upon up-to-date environmental impact
analyses prior to proceeding with an oil and gas lease sale on
Forest Service land. However, neither the Forest Service nor
BLM had given any consideration to the potential impacts that
high volume horizontal hydraulic shale development could have
on the land.
In fact, in 2006, the forest plan which was relied upon by
the Forest Service and BLM specifically mentioned that
hydraulic directional drilling was not considered economical at
the time. So none of the environmental analyses had actually
considered it certainly up until this point. The need for
updated analysis was, therefore, plainly necessary, as shale
drilling comes with a much larger footprint than conventional
forms of oil and gas extraction; larger drilling pads,
considerably more truck traffic and exponentially more fresh
water use and wastewater generation. The significance of these
new developments require an environmental impact statement.
Subsequent to the submission of protest, the Forest Service
recognized that high volume horizontal shale development had
never been considered or analyzed for the Wayne. Forest Service
withdrew the consent it had given BLM to proceed with the sale
based on that fact. The Forest Service is currently undertaking
review of new information, as was stated earlier today,
relating to the positive and negative impacts of shale
development in the Wayne.
The need for compliance with Federal law and the weaknesses
of Ohio state law necessitated the lease sale cancellation.
However, improving Ohio's oil and gas safety standards should
be low hanging fruit for the Ohio general assembly. Jobs and
adequate safety standards are not mutually exclusive. Improved
safety and environmental requirements will be easily absorbed
by the industry and in many cases should save the industry
significant sums of money.
One thing that U.S. Congress should consider is the Federal
Resource Conservation Recovery Act or RCRA. As I mentioned
earlier, Ohio does allow fracking or oil and gas wastewater
brine to be sprayed on local roads, and as many of us know, the
wastewater can be highly toxic. But were Congress to decide to,
I guess, close the exemption for oil and gas drilling in RCRA,
which would basically classify brines as hazardous waste, then
we would be talking about Class I injection wells for disposal
instead of Class II. We would have better monitoring, and we
would no longer have any brine spraying on our roads. Thank
you.
[The prepared statement of Mr. Johnson follows:]
Statement of Nathan Johnson, Staff Attorney, Buckeye Forest Council
Chairman Lamborn, Ranking Member Holt, and Members of the
Subcommittee, thank you and good morning.
My name is Nathan Johnson. I am the staff attorney for the Buckeye
Forest Council, a 501(c)(3) public interest organization. I speak on
behalf of Buckeye Forest Council today. The Buckeye Forest Council
(BFC) is a membership-based, grassroots organization dedicated to
protecting Ohio's native forests and their inhabitants. We seek to
instill in Ohioans a sense of personal connection to and responsibility
for Ohio's native forests and to challenge the exploitation of land,
wildlife and people.
I am here today to remark on the need for adequate analysis of deep
shale development on Ohio's public lands and for adequate health and
environmental safety standards regarding the same. Ohioans want jobs,
but we want healthy families and a clean environment, too. There is
nothing incompatible about jobs and adequate protection.
However, Ohio currently lacks adequate health and safety standards
to protect the public and our land from the potential water, soil, and
air pollution generated by a rapidly growing shale industry in the
state. For example, Ohio law does not require any pre-drilling water
testing or water monitoring requirements in rural areas. Ohio law
allows shale gas drilling sites to store toxic wastewater in open pits
with no fencing. These pits attract and kill wildlife, including large
numbers of bats and birds. Nothing in Ohio law prevents the burial of
contaminated drill cuttings on site, and Ohio law allows highly toxic
oil and gas field waste to be spread on community roads for dust and
ice control.
Ohio is 7th in the nation in population, but a mere 47th in public
lands available per capita. The Wayne National Forest, of which large
portions are located in Athens County, is Ohio's only national forest.
This past October, BFC formally protested the Bureau of Land
Management's proposed lease sale of 3,302 acres of the Wayne National
Forest for oil and gas drilling. Joining us in protest of the sale were
Athens City Council, Athens City Government, Athens County
Commissioners, Ohio University, the Burr Oak Regional Water District,
and several concerned organizations and local residents. A copy of
BFC's formal protest has been submitted to the Subcommittee.
From BFC's perspective, the reasons for the protest were simple.
Some of the flaws in Ohio's regulatory structure have already been
noted. Moreover, the Forest Service and the BLM would have violated
federal law had the sale proceeded. Federal law requires that both
Forest Service and BLM rely upon up-to-date environmental impact
analyses prior to proceeding with an oil and gas lease sale on Forest
Service land. However, neither Forest Service nor BLM had given any
consideration to the potential impacts that high volume horizontal
hydraulic shale development could have on the Wayne. In fact, the 2006
environmental review documents that Forest Service and BLM relied upon
as justification for the proposed sale expressly stated that horizontal
drilling was not considered because it was deemed economically
infeasible for the Wayne at the time. The need for updated analysis was
therefore plainly necessary, as shale drilling comes with a much larger
footprint than conventional forms of oil and gas extraction: larger
drilling pads, considerably more truck traffic, and exponentially more
freshwater use and wastewater generation, etc.
Subsequent to the submission of protests, the Forest Service
recognized that high volume horizontal shale development had never been
considered or analyzed for the Wayne. Forest Service withdrew the
consent it had given to BLM to proceed with the sale based on that
fact. The Forest Service is currently undertaking a review of new
information relating to the potential positive and negative impacts of
shale development on the Wayne.
The need for compliance with federal law and the weaknesses of Ohio
state law necessitated the lease sale cancellation. However, improving
Ohio's oil and gas safety standards should be low-hanging fruit for the
Ohio General Assembly. Jobs and adequate safety standards are not
mutually exclusive. Improved safety and environmental requirements
would be easily absorbed by the industry, and in many cases should save
the industry significant sums of money.
Lastly, some additional context regarding shale industry jobs
potential in Ohio is warranted. While the shale industry is likely to
generate new jobs for Ohio, the jobs figures projected by industry are
grossly inflated. Industry commonly touts some 200,000 new Ohio jobs.
However, Ohio State University researchers recently found that such
figures are deeply flawed, and that a figure close to 20,000 total new
jobs (both directly and indirectly created) is far more likely.
Moreover, the 20,000 jobs figure does not take into account potential
losses the tourism sector--a much larger employer than oil and gas--may
incur as a result of oil and gas development.
Thank you.
______
Mr. Lamborn. OK. Thank you all for being here. I am going
to hand the gavel to Representative Thompson.
Mr. Thompson. [Presiding.] Thank you, Chairman. I will take
the liberty of starting my 5 minutes. I think we will be doing
one less round of questioning.
Dr. Chase, it is very nice to meet you. You unfortunately
support my theory in Pennsylvania that we export our best and
our brightest. It is very nice to meet you. I have some
questions for you.
One of the claims I hear is that nobody has really looked
at the impact of horizontal drilling. Is that true? If it is
not, who has looked at the impact of environmental drilling on
the environment and on people?
Dr. Chase. A lot of people have looked at it. We have been
using horizontal drilling offshore in the Gulf of Mexico for
almost 50 years. We have fixed platforms out there and usually
put a template on the ocean floor. We have to drill down and
then outward to exploit the reservoirs we have out there
because you can't move those fixed platforms around very
easily.
On shore horizontal drilling started down in the Barnett
Shale in Texas about ten years ago, and it was only after
drilling a lot of vertical wells in very narrow short spacings,
similar to the way we have drilled wells in Ohio here for the
last hundred years, that companies discovered that by drilling
down and out horizontally, they can actually minimize the
impact on the environment.
Here in Ohio I was struck by some of the comments by Ms.
Hughes here. Over in the Athens area, which I am very familiar
with, you just drive along the highway and you see small wells
in the fields because they have been drilled for the last 50
years, especially since 1985, on 20-acre and 40-acre spacings.
That means that every 20 acres or every 40 acres, we have put
in a pad. We have set casing, and we have producing wells.
With the advent with horizontal drilling, we are able to
take a 640-acre tract, which is the equivalent of a whole
township, and put one small pad in the center of that 4 to 5
acres versus 2 to 3 acres every 40 acres. So we are replacing
16 well sites with one well site. And we can drill six
horizontal wells from that well site that exploit the entire
amount of acreage. There is much, much less road traffic. The
roads are centralized. Pipelines are centralized. Overall, it
is very beneficial to the environment.
Studies have been done on that down in Texas. Out in
Arkansas they have similar development going on in the
Fayetteville shale, and down in the Eagle Ford shale down in
Texas they are going through the same process now. So it is
effective.
Mr. Thompson. Thank you.
Mr. Looman, I am making an assumption that this part of
Ohio is similar to the part of Pennsylvania I represent, that
our number one export has been our young people. I take that as
a yes. That is unfortunate.
Has natural gas opportunity made or will it make a
difference in stopping the loss high school graduates?
Mr. Looman. I think it certainly has that opportunity. As
Congressman Johnson mentioned earlier, the ABC News story that
proclaimed us as the next boom town, the story is a little
premature, but what that led to was a huge amount of calls
coming into our office and the county Chamber of Commerce
office from young people who had moved away and desperately
want to come back and were asking about the opportunities that
this industry will bring in order for them to come back.
So I think the answer to your question, there is a strong
possibility that can happen.
Mr. Thompson. Are you seeing opportunities with business,
both service or manufacturing, that are not directly related to
the natural gas industry?
Mr. Looman. Yes. The supply chain is huge for us.
Industries in town or businesses in town that are involved in
some sort of opportunity that may be able to link to that
industry, as Mr. Heller was talking about his type of business,
we have seen that already happen here where local businesses
are starting to gain large amounts of revenue from these
companies.
Mr. Thompson. Our hotels and restaurants are just----
Mr. Looman. I want to thank you for inviting Mr. Heller,
too, because I think we have a new prospect for Jefferson
County.
Mr. Thompson. Mr. Heller, with that said, you talked about
120 employees directly attributable to natural gas energy
development. Do road builders use the equipment sold by your
members?
Mr. Heller. Yes.
Mr. Thompson. Are you aware of any increase in road
construction or improvements using this equipment in areas
producing natural gas?
Mr. Heller. Yes. The energy companies that own the sites or
are developing the sites are actually improving the roads for
truck traffic that they create. And if there is any damage to
the road, I am sure you have seen it yourself being from
Pennsylvania also, the roads are left in better condition when
they are done than before they came in. So it is been a real
benefit to the local communities in northern Pennsylvania where
I travel.
Mr. Thompson. Thank you.
Mr. Chairman?
Mr. Lamborn. [Presiding.] Thank you.
Mr. Johnson?
Mr. Johnson of Ohio. Thank you, Mr. Chairman.
Dr. Chase, in your testimony you talk about the high demand
for your graduates that is being experienced right now because
of the development of the Marcellus and the Utica. How much on
the average do these recent graduates make per year with these
new opportunities?
Dr. Chase. Average salary this year is about $95,000 with
signing bonuses of $10,000 to $15,000 a year on top of that.
Mr. Johnson of Ohio. Those young people aren't going out of
state, are they?
Dr. Chase. Well, actually still most of my students are
leaving.
Mr. Johnson of Ohio. Are they?
Dr. Chase. Yes. I think the Utica, impact of the Utica has
not hit home here yet. I have quite a few students that have
gone to work in the Marcellus, but by far and away, my students
go south to the Gulf of Mexico, to the Rockies, to California.
Mr. Johnson of Ohio. All the more reason why we need to see
this opportunity to keep these young people at home. Have you
experienced an uptick in prospective students applying to your
department, and do you have any plans to expand your
undergraduate program?
Dr. Chase. Yes. We have had a significant uptick. So far
this year we have had probably close to 200 applications for
admission. We expanded our incoming class from 75 students to
90 students this year. But already we have had 75 acceptances.
So we are looking at there is room for just 15 more students.
And 155 actually have been accepted to Marietta College. So we
are almost at capacity now.
Mr. Johnson of Ohio. You have testified as an expert, so to
speak, on several panels that I have witnessed. Do you feel
that the State of Ohio is doing a good job regulating hydraulic
fracturing and do you think a one size fits all approach that
is being advocated by the EPA is valid?
Dr. Chase. I am against the Federal Government taking over
these operations. I think that the Ohio EPA and our Department
of Natural Resources have been working very well, together. I
think that Senate Bill 165 that was put in place several years
ago has done more to ensure the protection of our environment
and our groundwater than any piece of legislation that I have
seen in the neighboring states. I would say Pennsylvania, Mr.
Thompson's state, West Virginia, it would be wise if they
considered adopting the same kind of plans that we have here.
I can tell you also that I talk with a lot of the companies
that are drilling wells here in this state, and they don't only
just meet the requirements that we have set forth in Ohio law
and regulations. Their goal is to exceed them. The last thing
that they want is something to happen like we saw happen in the
Gulf of Mexico, which of course, that was a well construction
failure issue also.
So well construction is the key to successfully doing all
of this. It is the key to making sure that hydraulic fracturing
is safe. There is a lot of education that has to go on. It is
the public and the corporations that have to step up and
contribute to that education.
Mr. Johnson of Ohio. Thank you, Dr. Chase. You add a great
deal of credibility to the analysis we are doing, and I
appreciate your testimony here today.
Mr. Looman, in your testimony you alluded to the struggles
that this area has seen, the steel industry leaving,
manufacturing leaving. Can you talk about the hope that the
people of Jefferson County now are sensing because of the oil
and gas development going on right here and that is expected to
come in the future?
Mr. Looman. Well, there is obviously great excitement. I
think it is also a sense of we are ready for it, where is it.
When, again, the ABC News story came out, we all thought it was
here. It is not here yet. It is getting here, and it is coming
slowly. But I think there is a huge amount of excitement, not
just the first wave, the first wave being petroleum, but then
what comes next.
You talked earlier about the cracker facility, should that
go anywhere in this area. That is going to lead to so many
opportunities for us going forward. So I think there is a huge
amount of excitement about what is coming now and what is
coming in the future and how we can take advantage of it,
particularly from a job creation standpoint.
Mr. Johnson of Ohio. Thank you very much.
Mr. Chairman, I am almost out of time here, but I am going
to close out my questioning by again thanking these panel
members for coming and reasserting two things that I said
earlier, one, making sure that these opportunities are coming
to Ohioans and that Ohioans are the ones getting the work and
the opportunities, and as Dr. Chase said, that our young people
are able to stay here at home and also that our landowners are
protected, that they are not required to give up their rights.
And I would like to know what those things are actually
happening.
So please reach out and contact my office. We want to know.
Again, I am not a no-regulation person, but I think where
public safety, public health and national security are a
concern, valid concern, we need common sense regulations, but
our regulations need to be based on fact and scientific
analysis, not on scare tactics.
With that, I yield.
Mr. Lamborn. OK. Thank you. Mr. Heller, you said that you
sell heavy equipment in Pennsylvania and New York?
Mr. Heller. Correct.
Mr. Lamborn. Have you noticed a difference in the volume of
business in those two states? Because I think in New York for
the last year or two, they have been under a statewide
moratorium on hydraulic fracturing.
Mr. Heller. Well, we are waiting poised and ready for them
to decide to start drilling up there. Yes. Most of the revenue
from my company is coming from Pennsylvania as are the job
opportunities. We are sort of treading water in New York hoping
that opportunity avails up there also.
Mr. Lamborn. When a company comes in and invests in a half
a million dollar piece of equipment, what kind of spin-offs--
you already referred some to this, but I would like to bring
this out just a little bit more--what kind of spin-offs does
that have in terms of jobs that are created either in your
company or in associated companies?
Mr. Heller. Let us look at the level above and below me.
First off, we are buying the cranes which are built in Shady
Grove, Pennsylvania. It is predominantly the machine that is
being used in the fracking site. That plant has increased by a
hundred percent employment over the last two years, because
they were on their heels at the end of '08.
The manufacturer has had to ramp up to produce these
machines. Specifically we are talking about the cranes that you
referenced. My customer that then buys it employs multiple
people to run that machine. You have safety people. You have
oil riggers. You have operators, maintenance people, et cetera.
One example of a customer that bought cranes from us, he has
taken his employment from 100 to 230 in a two-year period as he
has added these cranes. You can see the levels above and below
me are just a multiplication of our results.
Mr. Lamborn. Thank you.
Mr. Chase, I would like to ask you a couple of questions on
water. First of all, is water similar around the country,
either what it looks like or where it is found, from state to
state where you can expect Washington to have one size fits all
and makes sense, or are there tremendous differences between
states?
Dr. Chase. There are differences in water. When I talk to
my students about water and natural gas, it is like your hand
and fingerprints. Everybody's fingerprint is different, and
everybody's water has a little different fingerprint. I think
it is especially important, as we heard from two members here,
that when people take out a lease, when they lease with an oil
and gas company, they can do a lot on their own, especially if
they work as an association, to ensure that their water is
tested prior to any operations that start in an area.
Mr. Lamborn. There is not anything to prevent someone from
testing the water beforehand?
Dr. Chase. No. There is nothing to prevent it. In fact,
they should make the companies test it, pay to have it tested
by an independent source. Then after the drilling is done, it
should be tested again. Then it should be tested again a year
or two later. But the water in Pennsylvania might be a little
different than the water in Ohio, for example, and it is going
to be mineral content. You can have methane in water sometimes.
The first natural gas well ever drilled in the United
States, believe it or not, was drilled in 1821 in Fredonia, New
York and it dug by hand to a depth of 27 feet. There was
natural gas in the rock at a depth of 27 feet. Just up the
river from Marietta, there is an area called Burning Springs
Anticline, who was named Burning Springs by the Indians because
of natural gas seeps coming out of the swamps.
Colonel Drake, someone mentioned Drake's well up in
Titusville, Pennsylvania, drilled in 1859, was drilled to a
depth of 69 feet.
Mr. Lamborn. Water disposal, what can or should be done?
For instance, what is done in Ohio? Because I have heard
concerns about farmland being contaminated by the improper
distribution of toxic water so-called.
Is it toxic, number one? And what should be done with water
after it is used in a well to be responsible?
Dr. Chase. Ohio has very strict laws that the Department of
Natural Resources administers with regard to what we do with
frack water or drilling fluids after we are done with them. As
someone mentioned, it has to be disposed of in Class II
disposal wells. It can't be dumped into a stream, a creek. It
cannot be disposed of on country roads unless a township has
permitted that.
There are very strict regulations on that. Our disposal
wells are constructed to minimize--not minimize--but to avoid
any possible contact with surface groundwaters by virtue of the
casing and the cement that we have in the borehole protecting
the groundwater. So in my mind, it is not an issue. We have a
very safe system here in Ohio.
Mr. Lamborn. All right. Well, I want to thank each member
of the panel for being here, for your testimony and for
answering questions. If we have any additional questions that
we submit to you in writing, we would ask that you respond to
those as well.
If there is no further business, without objection, the
Committee stands adjourned. Thank you all for being here.
[Whereupon, at 11:51 a.m., the Subcommittee was adjourned.]