Marcellus Shale: Future Development in New York State

1. Marcellus Shale: Future Development in New York State September 22, 2011 By: James P. Rigano Rigano LLC 425 Broad Hollow Road, Suite 217 Melville, New York 11747 (631) 756-5900 jrigano@riganollc.com

2. What is the Marcellus Shale? Black Shale that holds huge amounts of natural gas. It extends through New York, Pennsylvania, Ohio and West Virginia. Horizontal well drilling technology has been developed in recent years, allowing increased access to the Marcellus Shale natural gas.

3. Gas has been extracted from the Marcellus Shale since 1880 in New York State. All wells to date being vertical wells. Horizontal wells have not yet been used in New York. The Marcellus Shale consists of fine grain sedimentary rock that contains high levels of organic carbon which originated in ancient seas. Pressure and temperature transformed the organic material into gaseous petroleum compounds. The gas is located in isolated pore spaces or fractures. Within 30 years, there could be up to 40,000 wells developed.

4. Are All Areas in the Marcellus Shale Considered the Same for Potential Production? The counties of Broome, Tioga and Chemung are expected to yield the highest production of gas. The counties of Otsego, Delaware and Sullivan are expected to have average potential. The western counties of Chautaugua and Cattaraugus are expected to have lower potential.

5. Hydraulic Fracturing: How Does It Work? The well is drilled vertically into the Marcellus Shale and then turned in a horizontal direction. Fluids are pumped into the well along with sand under high pressure to create fractures in the rock. There is no blast or explosion. The sand holds the fractures open allowing the gas to flow into the wells. Hydraulic fracturing was first developed in the 1940s and about 90% of the wells drilled in New York, which are vertical, use hydraulic fracturing.

6. The horizontal well drilling allows a number of wells to be drilled from a single pad. The maximum lateral length do not greatly exceed the depth of the well. A 5,000-foot deep well will generally have a maximum lateral length of about 5,000 feet.

7. What is the Composition of the Fracturing Fluid? Many different chemicals are potentially used in the fracturing fluids that have been shown to cause serious health effects. The chemical fluids would be transported in Department of Transportation-approved trucks and containers. The fluid is approximately 98% fresh water and sand and approximately 2% fracking fluid.

8. There are hundreds of chemicals drillers can choose from to create the fracking fluid, which may include benzene and benzene-related chemicals, acetone, formaldehyde, mineral spirits, and naphtalene.

9. How Much Water is Used? 2.4 million to 7.8 million gallons of water may be used in a hydraulic fracking procedure that is 4,000 feet deep. The water may be delivered by truck, pipeline or directly from a water body. Proper regulation will be required to avoid modification of groundwater levels, and stream flow.

10. The permitting process would involve an evaluation of the water usage and potential impacts. Up to 20% of the liquid utilized in the fracking process could be flowback that is reused for further hydraulic fracturing.

11. What are the Anticipated Subsurface Impacts? • The New York State Department of Environmental Conservation has concluded that it is highly unlikely that groundwater contamination would occur by fluids seeping from the well. • Regulatory officials from 15 states recently testified that groundwater contamination as a result of hydraulic fracking has not occurred. • DEC has also stated that no significant water resource contamination is likely to occur due to underground vertical migration of fracking fluids. • The shale formations are separated from potential freshwater aquifers by more than 1,000 feet of shale of moderate to low permeability.

12. What Waste Water is Generated from the Hydraulic Fracking Process? After the hydraulic fracking process is complete, pressure is released. The direction of the fluids will reverse to the surface. 9% to 35% of the fracturing fluid pumped into the well is expected to be recovered at the surface. The volume should range from 216,000 gallons to 2.7 million gallons per well over a 2 to 8 week period. Reuse of some flow-back water for future fracking operations will be performed. The waste fluids are classified as non-hazardous industrial/commercial waste that would have to be hauled under New York State Part 364 waste transporter permit.

13. The DEC is expected to require that the permit applications include a demonstration that there is a source to dispose of the wastewater. The waste fluids can be transported and disposed at publicly-owned treatment works (POTWs), municipal wastewater treatment facilities. Based on available information, there is not available capacity in POTWs in New York State to accept the wastewater that would be generated.

14. Privately-owned treatment facilities can be utilized and will have to be developed in New York State. The DEC will develop a tracking system, similar to that used for medical waste, for the wastewater generated from fracturing operations.

15. What Land Disturbance Issues are Expected? Gravel access roads, well paths and utility corridors will be required. One multi-well pad is expected to be approximately 4.8 acres. Another approximately 4 acres will be required for access roads.

16. During the long-term production phase, a multi-wall pad site should occupy about 1.5 acres. Utility corridors will be developed for potential water lines, electric lines, gas pipelines, and compressor facilities. Currently there are 6,732 natural gas wells in New York State with the densest development being three wells per square mile.

17. It is anticipated that during the drilling phase, multi-well sites will disturb 1.2% of the land and during the production phase will occupy 0.23% of the land.

18. What are the Economic Benefits? Direct construction employment is predicted to range from 4,408 construction jobs up to 17,634 jobs. An additional 29,174 jobs should result indirectly. During maximum construction activity, total construction earnings should range from about $300 million to about $1.2 billion.

19. What are Limitations in Watersheds? Hydraulic fracturing operations will not be allowed in the New York City and Syracuse watersheds. According to DEC, fracturing activity is not consistent with the preservation of these watersheds and unfiltered drinking water supplies. Further, DEC recommends that fracturing operations not be permitted within a 500-foot buffer area around primary aquifers.

20. Additionally, no fracking operations will be allowed within 2,000 feet of public drinking water supplies.

21. What is the Status of the New York State Department of Environmental Conservation? The DEC has issued a voluminous supplemental generic environmental impact statement that is a supplement to a 2009 environmental impact statement. The DEC received more than 13,000 public comments on the 2009 draft. DEC is currently accepting comments on its most recent supplement through December 2011 and will be holding hearings.

22. DEC will be issuing revised regulations under New York State Environmental Conservation Law Article 23 for the issuance of permits for hydraulic fracking. Annual limits will not be placed on the issuance of permits. However, the permits will be limited based on the DEC resources that are available for the review and approval of permit applications.

23. DEC intends to promulgate regulations based on the supplemental generic environmental impact statement.