Ohio Department of Natural Resources Division of Mineral Resources Management (DMRM)

1. Emergency Management Association Of Ohio- Spring Directors Seminar Ohio Department of Natural Resources Division of Mineral Resources Management (DMRM)

2. On Behalf Of: Director – David Mustine Assistant Director – Scott Zody DMRM Chief - John Husted Presentation by – Tom Tugend

3. Division of Mineral Resources Management (DMRM) Provides for the Safe and Environmentally Sound Development and Restoration of Mineral and Fossil Fuel Extraction Sites

4. What We Oversee • Oil/Gas Well Permitting, Drilling, • Production, Plugging • Industrial Mineral Permitting & • Mining • Mine Safety

5. What We Oversee - Continued • Coal Mine Permitting, Mining • and Reclamation • Abandoned Mined Lands • Reclamation • Orphan Well Plugging • EPA Certified Lab

6. Our Authority For The Regulation of: • Oil and Natural Gas Wells • Salt Water Injection Wells • Brine Haulers • Administering the Orphan Well • Program • Ohio Revised Code 1509 • Ohio Administrative Code 1501

7. Permitting Overview • Leasing Precedes Permitting • Owner Registration (Bonding/Insurance) • Permitting: Spacing, Casing, Pre-Permit Site • Review, Permit Conditions, Restoration Plan

8. Spacing Categories Distance DepthAcres Unit LinesBet. Wells 0 to 1,000’1100’ 200’ 1 to 2K10 230’ 460’ 2 to 4K 20 300’ 600’ 4,000 + 40 500’ 1,000’

9. Field Inspection and Enforcement • Inspection • Pre-Permit Site Review • Critical Phases of Drilling and • Approval of Preliminary Site Restoration • Routine Inspection of Production Wells • Response to Complaints/Public Assistance • Oversight/Approval of Plugging and • Final Restoration

10. Field Inspection Cont. • Enforcement • Progressive Enforcement with Resolution at • Lowest Level: • Compliance Notices, Orders, Civil and • Criminal Actions and Consent Agreements, • Loss of Permitting – Permit Block, • Suspension of Producing Operations

11. Prevention of Impacts to the Environment and Protection of Public Safety • Key Factors: • Permitting • Well Site Construction • Well Construction ! • Well Control ! • Fluid Control ! • Oversight

12. Our Field Enforcement Focus/Priority • Complaints Posing Threats to Public • Safety and the Environment • Drilling Operations – Protection of • Fresh Water/Public Safety/Environment • Plugging Operations • Routine Inspections – Public • Assistance

13. Well Site Identification Idle Wells Pollution/Contamination Restoration Brine Disposal Gas Leaks Most Common Violations

14. Good or Bad What is the Real Story Hydraulic Fracturing Fracking Fracing

15. Hydraulic Fracturing A Process Using Pressure and Fluid to Break Open (Fracture) the Oil and or Natural Gas Formation to Permit Production that Otherwise Would be Not be Economic.

16. Hydraulic Fracturing Cont. Is this a New Process – NO Almost Every Well Drilled in Ohio Since the Late 1970’s has Been Hydraulic Fractured (Approximately 80,000 Wells have Been Hydraulic Fractured in Ohio)

17. Hydraulic Fracturing Cont. • TheHydraulic Fracturing Fluids Consist of: • Water • Sand (proppant) • Chemicals (to Make the Water Viscous to • Carry the Sand), Scale Inhibitors, HCL. • 99+% Sand and Water

18. Hydraulic Fracturing Cont. Has Hydraulic Fracturing Contaminated Groundwater in Ohio – NO With Proper Well Construction, Well Control and Fluid Control, Impacts to the Environment are Prevented.

19. Hydraulic Fracturing Cont. The Fracturing Fluids are Maintained Inside The Steel Cased Well Bore and or in Lined Pits or Steel Tanks then Recycled (Reused) Or Properly Disposed of Under the Authority the Division of Mineral Resources or Ohio EPA.

20. Frac Containment Target shale is thousands of feet below any drinkable ground-water layers. Thick layers of shale and limestone are above and below shale keep fractures from penetrating upward and downward into adjacent formations. Companies do not want to use excess frac materials and power and do not want to produce water Very little additives in frac fluid (0.05%) Fluid is injected into undrinkable brine zones, very unlikely to migrate Marcellus Formation Graphic from Kostelnick (2010).

22. Oil and Gas Activity 1990-2010 Total Permits Issued: 44,367 Drilling - 21,507 Plugging - 22,860 Wells Drilled: 16,409 Wells Plugged: 15,298 Total Ohio Wells: 64,427

23. Wells Drilled – The Early Years • YearWells Drilled • 2593 • 1895 6147 • 1900 6555 • 2134 • 1980 5100 • 6085 • 4830

24. 2010 Ohio Oil/Gas Information • 431 Wells Were Drilled in 44 Counties • 429 Wells Were Plugged • 4.78 Million Barrels of Oil Produced • 77 Billion Cubic Feet of Gas Produced

25. Horizontal Shale Drilling • Marcellus Shale • Utica Shale Why all the Interest/Press ? What is the Difference Between a Traditional Well and a Horizontally Drilled Shale Well ?

26. So, why is this a big deal?Potential Production A “typical” conventional gas well in the Appalachian Basin produces 100–500,000 CF of gas per day and 200–500 MMCF in its life. (500 MMCF x $4/MCF* = $2M gross revenue; creating a $250K royalty payment @12.5% of gross.) Horizontal Marcellus (or Utica?) well may produce around 2–10 MMCF of gas per day and are projected to average around 4 BCF of gas over their life, per well. (4 BCF x $4/MCF* = $16M gross revenue, creating a $2M royalty payment @ 12.5% of gross.) KEY M = thousand MMCF = million cubic feet (or 1,000 MCF) MCF = thousand cubic feet BCF = billion cubic feet [Division of Geological Survey 2011]

27. Differences Between a Horizontal Well andTraditional Vertical Well • Everything is Bigger – It Takes Longer • Well Site 3-5 acres vs. 1-2 acres • Shale Rig is Much Larger • Associated Equipment – More of it • One Month/Well to Drill vs. One Week • Up to 6 Wells Can be Drilled From One Well Site

29. We are not alone…. Source: U.S. EIA, 2010. Many shale gas plays are now developing across the United States and Canada.

30. Marcellus Shale Activity Pennsylvania 2004: Range Resources Drilled the First Horizontal Marcellus Shale Well 2008: 195 Marcellus Wells Drilled 2009: 763 Marcellus Wells drilled 2010: 1,454 Marcellus Wells Drilled

31. Marcellus Shale – Ohio Activity To Date: Vertical Permits Issued: 67 Vertical Wells Drilled: 44 Horizontal Permits Issued: 10 Horizontal Wells Drilled : 2 As of 03-08-11

32. Utica Shale – Ohio Activity* To Date: Vertical Permits Issued: 19 Vertical Wells Drilled: 9 Horizontal Permits Issued: 4 Horizontal Wells Drilled : 1 As of 03-08-11 *Permits issued since December 2009

33. Generalized Geology and Profile of a Utica Shale Well

34. Sandstone: A Typical Reservoir Rock

35. PORE SAND GRAIN SAND GRAIN SAND GRAIN PORE Graphic from Kostelnick (2010). A porous sandstone prepared for viewing under a microscope reveals pore spaces (blue areas).

36. Shale is extremely fine grained with many very small pore spaces. UTICA SHALE

45. Risks • Poor Well Site Construction – Erosion and Sedimentation, Impact to Wetlands • Road Impact/Damage • Spills (Oil/Brine/Drilling Fluids) On-Site/Off-Site • Uncontrolled Releases of Natural Gas, Oil, Completion Fluids

46. Risks Cont. • Fires During Drilling/Well Completion • Injury to Rig Hands While Drilling • Lightning Strikes • Tank Fires

47. Tank Launching

50. ODNR Division of Mineral Resources (DMRM) Management Contact Information Columbus Office: 614-265-6633 Uniontown Office: 330-896-0616 New Philadelphia Office: 330-339-2207 Cambridge Office: 740-439-9079 Jackson Office: 740-286-6411 Salem Office: 330-222-1527 Mount Vernon Office: 740-392-4499 Findley Office: 419-429-8304 Lebanon Office: 937-933-6717