GUEST EXPERTS:

DAVE YOXTHEIMER & JOHN HANGER

APRIL 7, 2011

American Association of Blacks in Energy (AABE)

Webinar on

Natural Gas Development

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AGENDA

David Owens Introductions and Overview

Dave Yoxtheimer Intro Remarks AABE Interview Questions

John Hanger Intro Remarks AABE Interview Questions

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Why is natural gas development important?

DOMESTIC : A recent Rasmussen poll found that 76% of Americans believe the United States does not do enough to develop its own gas and oil resources.

ENVIRONMENTAL: Natural gas is cleaner burning than traditional forms of energy such as oil and coal thus helping reduce GHG emissions.

ABUNDANT: Natural gas could help power America’s homes, businesses and transportation for well over 100 years.

ECONOMIC: A recent analysis projects the total value of Marcellus resources to reach $250 billion in Pennsylvania alone, and support more than 200,000 jobs. 

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Shale Gas Projections

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Geological Expert

Dave Yoxtheimer Hydrogeologist and associate with The

Pennsylvania State University’s Marcellus Center for Outreach

and Research

B.S. in Earth Science from The Pennsylvania State Univ.

Current Ph.D candidate in Geosciences

U.S. Shale Map

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Depth of Marcellus Shale Base

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Where are Wells Being Drilled

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Multiple Wells Per Pad = Reduced Footprint

Hydraulic FracturingOverview

So what is Hydraulic Fracturing?

Hydraulic fracturing (fracking) is a process used to extract natural gas by injecting sand, water and a small amount of additives deep below the earth’s surface. Typical volume of water ranges from 3 to 7 million gallons for each well.

This process opens fractures in the rock allowing the natural gas deposits to escape.

Fracking has been effectively utilized for years and is necessary for economical natural gas development.

Hydraulic Fracturing

Hydraulic FracturingSafety

Water Concerns There have been claims that hydraulic fracturing has

contaminated water sources. Greatest risk is in managing flowback water at surface not from deep fluid migration from hydraulic fracturing.

Increased state regulation and improved site management practices occurring to ensure the process minimizes potential adverse impacts.

EPA Report EPA scientists are currently undertaking another study to further

examine the relationship between hydraulic fracturing and groundwater. Initial research results are expected by the end of 2012 with a goal for a report in 2014.

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Regulatory Expert

John Hanger Special Counsel to Eckert Seamans

Duke University, 1979 University of Pennsylvania School of Law, 1984

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Pennsylvania’s Strategic Objective:

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Produce The Gas and Protect The Environment

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Goals

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Economic Development/Jobs2010 PA Ranked Second in New Job CreationStrong State Regulation To Encourage a

World Class IndustryTax Revenues to Pay For Local Impacts,

Environmental Programs and Vital State Services Like Schools

Use More Gas and Less Coal and Oil to Reduce Pollution

Energy Security

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Producing Gas

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First Marcellus Well Drilled in 2005

By 2008 Marcellus Industry Booming Gas at $13/mcf

By January 2011, 6,000 Marcellus Per mcfs Issued

2,500 Marcellus Wells Drilled Gas at $4.50/mcf

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Producing Gas cont’d

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PA Marcellus Profitable at About $2.50/mcf and Up

PA on the Way to 2 Trillion Cubic Feet/Year Production

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Protecting the Environment – Issues for the Public

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1. Impact on water from drilling /wastewater

- Streams- Private water wells- Withdrawals

2. Operational Problems/Accidents- Spills- Leaks- Fires – Response time- Blow outs – Response time- 50 plus emergencies responses

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Protecting the Environment – Issues for the Public

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3. Truck Traffic Impact & Safety- Congestion- Road damage- Unsafe trucks

4. Gas Migration

5. Public Lands: State Forests & Parks

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Protecting the Environment – Issues for the Public

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6. Taxation- 63% support for drilling tax as of

1/1/2011

7. Staffing of Oil and Gas Program- Number of employees- Location

8. Air Impacts- Nox- HAPs

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Protecting the Environment – Issues for the Public

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9. No Clear Benefit for Public Health In Minds of Public from Gas Production

- 100,000 megawatts nationally of 40 year old, poorly controlled gas- Just 120,000 natural gas vehicles in USA

10. Credibility of Regulation/Regulators

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Media Environment

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BP Oil SpillGaslandMedia Seeking Dramatic StoryDimock/Gas MigrationHighly Skeptical of Industry & Regulators

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Review & Strengthen All Rules

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1. Water Withdrawal Plan: August 20082. Waste Water Disposal/TDS Rule: August 20103. New, Strong Drilling Standards: January 20114. 150 Feet Mandatory Buffer from All

Development for 22,000 Miles of High Quality Steams: November 2010

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Staffing

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88 Positions in Oil Gas Program as of September 2008

Doubled Staff to 202 by December 2010

Raised Fee When Applying For a Permit from $100 to as much as $10,000 for Deep Wells

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Active Enforcement

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1,400 Violations from January 1, 2008 to June 30, 2010

Companies Pay for Clean Up of Spills, Leaks, Gas Migration

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Some Conclusions

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Shale gas is a game changer!

It is an abundant domestic source which can reduce our dependency on foreign oil

It can put downward pressure on the price of natural gas

It can provide lots of jobs

It can be procured with minimal impact on the environment

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Future AABE Webinars

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Potential budget cuts on the Low Income Home Energy Assistant Program

Domestic on and offshore drilling of oil and natural gas

Proposed EPA Regulations: Hazardous Air Pollutants Cooling Water Intake Structures Greenhouse Gas Emissions

Other