THE MARCELLUS LIVING WITH A SUPER GIANT

1. THE MARCELLUSLIVING WITH A SUPER GIANT Policy Perspectives & Impacts Douglas Shields Member Pittsburgh City Council 2003 ~ 2011

2. History2003 • USGS est. 1.9 Trillion Cubic Feet of Gas • Subsequent estimates as high as 516 Tcf. • Triple Play: Marcellus, Utica, Devonian • Covers 5 States: Pennsylvania, New York, West Virginia, Ohio & Maryland ~ 64 Million Acres

3. History: The Energy Act of 20051700 pages • Key paragraphs
\2005SEC. 322. HYDRAULIC FRACTURING. 
Paragraph (1) of section 1421(d) of the Safe Drinking Water Act (42 U.S.C. 300h(d)) is amended to read as follows: • 
‘‘(1) UNDERGROUND INJECTION.—The term ‘underground injection’— 
‘‘(A) means the subsurface emplacement of fluids by well injection; and 
‘‘(B) excludes—
‘‘(i) the underground injection of natural gas for purposes of storage; and
‘‘(ii) the underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities.’’.SEC. 323. • OIL AND GAS EXPLORATION AND PRODUCTION DEFINED. • Section 502 of the Federal Water Pollution Control Act (33 U.S.C. 1362) is amended by adding at the end the following: 
‘‘(24) OIL AND GAS EXPLORATION AND PRODUCTION.—The term ‘oil and gas exploration, production, processing, or treatment operations or transmission facilities’ means all field activities or operations associated with exploration, production, processing, or treatment operations, or transmission facilities, including activities necessary to prepare a site for drilling and for the movement and placement of drilling equipment, whether or not such field activities or operations may be considered to be construction activities.’’.

4. The Energy Act of 2005 • Only 16 companies stood to significantly benefit from this exemption from clean water laws: • Anadarko, BP, Burlington Resources, ChevronTexaco, ConocoPhillips, Devon Energy, Dominion Resources, EOG Resources, Evergreen Resources, Halliburton, Marathon Oil, Oxbow (Gunnison Energy), Tom Brown, Western Gas Resources, Williams Cos and XTO. • These companies gave nearly $15 million to federal candidates—with more than three-quarters of that total going to Republicans. • Moreover, the 16 companies spent more than $70 million lobbying Congress. • Source: Public Citizen www.citizen.org

5. Global Players • Domestic Energy? • Since 2003, more than thirty international energy companies have secured leases in the region. • Global industry players such as Exxon, Chevron, Royal Dutch Shell, (Netherlands), Statoil (Norway), Total SA (France) and Sinopec (China), now have a significant presence here. • Other foreign companies with Marcellus shale interests are Mitsui and Sumitomo from Japan, the BP group from Great Britain, Atinum from Korea and Reliance Industries from India. • It is estimated that some 120 corporations, domestic and foreign, are active in Pennsylvania’s shale gas extraction industry.

6. Leases Everywhere 2006 to 2009 • The race was full-on by energy companies and independent brokers to secure leases in Pennsylvania in order to capture as much of the market as possible. The more acreage under control, the more value of the corporations share price and bigger dividends to the share holders. • The leasing binge was indiscriminate, occurring in rural and urban areas no matter the character of the property involved be it residential, commercial, farm, cemetery, park, industrial, private or public. • Significant tracts of private and public lands, including state forests and parks are now leased for shale gas extraction.

7. Policy Drivers • The Saudi’s control about 20% of the world’s oil reserves and, as such, it has significant influence on global price of oil. • A commensurate amount of energy derived from the natural gas is locked within the Marcellus Utica & Devonian Shale. • Control of the Marcellus conveys with it significant influence of the global methane gas prices.

8. Policy Drivers • Of the twenty-six municipalities that have entered the PA Act 47 program, twenty are still so designated. Most Act 47 communities went in the program the 1980’s and 1990’s. • Pennsylvania’s largest city, Philadelphia, has had supervision of a special state appointed oversight committee since 1992, when the city was essentially bankrupt. Pittsburgh, the second largest city, went into Act 47 in 2004. Harrisburg, the state capital, declared bankruptcy in late 2011. • Pennsylvania school districts are facing similar fiscal pressures. Pension programs at all levels of government are challenged at best. • In 2011, the incoming Governor faced a $5 Billion operating deficit. Projected revenues in the 2011-2012 draconian state budget have fallen short and it faces more challenges with it’s own troubled pension fund. • The recession of 2008 compounded the effect of decades of ongoing decline and has contributed to local government’s financial crisis.

9. Policy Drivers • Given these conditions it is easy to understand why the body politic of Pennsylvania would focus heavily upon the positive aspects of the Marcellus – jobs, domestic energy development, and increased tax revenues. • It was a new day in Pennsylvania and energy resources were seen as the means to reestablish Pennsylvania’s waning economic might.

10. Impacts • Air, water, potable water, mortgages, property rights, insurance, leases, split estates, public health, infrastructure, taxation, regulation, agency oversight (DEP/EPA), land use, infrastructure, state, county & municipal government, public safety, well fires, waste stream management, earthquakes, pipeline rights-of-way, eminent domain, forced pooling, preemption of local zoning law, public land leases, state parks & forests, PUC oversight of local legislative bodies, litigation, compatibility standards, public dissent, community rights…

11. YOUR JOB AS CITIZEN • BE INFORMED ~ DO YOUR HOMEWORK • CONSIDER ALL ASPECTS • DEMAND FULL DISCLOSURE FROM ELECTEDS • IF CONSIDERING LEASING SEEK LEGAL COUNSEL • WHAT WILL MY VILLAGE LOOK LIKE IN TEN YEARS?