Shale Gas Bubble Burst

SUBHEAD: Drilling permits for fracking gas decline sharply for the Pennsylvania Marcellus formation.  

By Tom Corbett on 17 August 2012 for Examiner -  

Image above: Fracking waste water pond in Bradford, Pennsylvania. From (

New data released yesterday by the Pennsylvania Department of Environmental Protection shows a severe decline in new shale gas well permits issued for the first six months of this year. Permits issued by the State have declined sharply since January 2012 and dropped for the last three straight months for both new wells and “refracks” of existing wells. The significant declines in permits come at a time when the shale gas industry has been crossing over into Ohio for the more lucrative wet oil infused shale gas and leaving the Marcellus.

Yet the Corbett Administration is in all-out effort to speed up the State’s permitting process and fighting hard to keep Act 13 prohibitions in place to prevent local townships from enforcing their own zoning ordinances when it comes to shale gas drilling.

The State issued roughly 350 shale gas permits in January of this year while for July they issued a total of roughly 110 permits, more than a 70% decline. For May 250 permits were issued which decreased to 150 permits for June followed by another decline to 110 permits for July, a decline trend for permits which began back in 2011.

Further complicating the picture is the increasing role “refracking” is beginning to play in these operations. Refracking a well is used to keep up its output as aggressive production depletion rates remain a persistent fact of life for shale gas drillers. This means it is no longer clear from State’s data what permits are for new wells or to simply refrack existing wells needed to keep up output.

The declines for permitting are now occurring throughout the State including Susquehanna, Bradford, Tioga, Washington and Greene counties, the best “sweet spots” to date in the State for the industry. It appears not even the claims of wet oil infused shale gas in the southwest corner of the State are holding the drillers main attention.’s senior researcher Matt Kelso said the State’s data now confirms, “The industry is ramping down permitting, drilling and production efforts across the State for the time being.” Kelso also stated, “State data released yesterday now shows oil and gas production for the last 6 months to be just 50% of what was produced for the 6 month prior time period.” He cautioned the report may be incomplete as some shale gas companies have not reported thier production into the State DEP.

Kelso also observed the recent report by the Energy Information Agency regarding 2011 production rates which now have many claiming the Marcellus is well on its way to be the number one shale gas producer should be viewed realistically. He notes the EIA’s gas production report reflects results from the prior drilling ramp up activity in 2009 and 2010 and should be viewed in balance with recent drilling decline data from 2011 and year to date 2012.

Meanwhile Chesapeake Energy, BHP Billiton and numerous other gas companies heavily involved in shale gas drilling have written off billions of dollars in claimed shale gas reserves on their 2nd quarter financial operating results. This comes on the news the Texas Barnett and Louisiana Haynesville shale plays now appear to be peaking with annual production declines of 29% to 40% despite several thousand new wells coming online in these plays over the last year.

Even as the industry leaves Pennsylvania for the greener pastures of Ohio’s wet shale gas, the Corbett Administration continues to fight on to make drilling access even easier within the State. The Governor’s Act 13 overhaul of mining and drilling regulations early this year called for the controversial measure of prohibiting local municipalities from preventing shale gas drilling, toxic waste ponds, compressor yards and the rest of the industry’s heavy footprint from being governed by a given local township's zoning ordinances.

Among other things, it meant a local township could not stop a shale gas rig with toxic tailing pond from being located near a school or in a residential area normally protected by local zoning ordinances. Setbacks and other zoning issues would be controlled by the State instead.

Several local townships filed an appeal of the State’s control over their zoning enforcement rights whereby Commonwealth courts struck down these Act 13 prohibitions last month. The Corbett Administration immediately filed an appeal to the State’s Supreme Court. More than 70 local townships then filed letters of support to the court in favor of lower court’s ruling. Yesterday the court ruled the Act 13 prohibitions cannot be enacted in any manner until they rule on the appeal at large.

Secretary Michael Krancer, who heads the Pennsylvania Department of Environmental Protection, whose lawyers assisted in filing the Administration’s appeal has been on record in the past as saying, “At the end of the day, my job is to get gas done.”

As the heated debate on hydraulic fracking continues, scant attention is being paid to the rapid decline rates of shale gas wells production compared to conventional gas wells.

Historical well data continues to confirm up to 85% or more of initial shale gas production per well is occurring in its first 12 to 18 months then tailing off rapidly. Industry claims of “hyperbolic”, meaning long term per well operating lifetimes of 30 to 40 years, remain unproven. This has significantly stressed the financials of the industry as payback based on long productive output is not yet a proven part of shale gas dynamics.

For those who simply claim when the price for natural gas rises the drillers will return, little thought is being given to how high that price must go and if it will cross the threshold whereby the price needed will create its own ongoing price demand destruction.

For those who simply believe the answer is to mandate the use of more natural gas, electric utilities and many other large industrial users remain wary of getting hooked on natural gas due to the industry's long proven history of unpredictable price swings. A history of unpredictablity perhaps more should take into consideration.

See also:
Ea O Ka Aina: Shale Gas Hype Unfolds 6/24/12
Ea O Ka Aina: Shale Gas Hype 5/8/12 .

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