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Fayetteville Shale Play spurs concerns: environmental impact remains unknown.

ALTHOUGH THE FAYETTEVILLE Shale Play is providing an economic hot in the arm for north-central Arkansas, the environmental impact of drilling for gas remains largely unknown.

Some state officials and landowners are expressing concerns, especially about contamination and depletion of the state's water supply. The fears stem from two factors: the huge amount of water required to exploit the play and the example provided by earlier drilling in western Arkansas.

The conflict between economic windfall and potential environmental damage is reflected in state agencies and the Legislature. The Arkansas Geological Commission has sought to downplay concerns, while the Arkansas Department of Environmental Quality says more can be done to ensure gas companies and lawmakers protect the environment. The Arkansas Oil & Gas Commission, for its part, is torn between protecting owners of land and mineral rights and earning the state a big payday.

Neighboring states active in drilling, such as Oklahoma and Texas, have updated laws and regulations in place. They also have a single agency--not Arkansas' two--overseeing production and placement of drilling rigs. Arkansas primarily relies on air and water pollution regulations drawn up in 1949 and 1953 and then partially updated in 1993, according to the ADEQ.

"There have been tons of meetings at the legislature regarding tons of issues surrounding the Fayetteville Shale Play and even a few bills regarding the environment that have been unsuccessful," said Rep. Betty Pickett, D-Conway. "But to me it seems like we should be focusing on how much water is being used and where it is coming from, for starters."

Some legislators and state officials argue that it's too soon to know the environmental effects of drilling in the play and that it's going to take time to work out regulatory details.

But the state is in a position to learn from the past, one legislator says, just by looking at the impact gas drilling has had in western Arkansas, such as the area around Booneville, which is in the Arkoma Basin. The largely sandstone geology in the conventional Arkoma gas formation is similar to the Fayetteville Shale in that horizontal and water-stimulated drilling is needed to make exploration economically feasible.

"The drilling here and the exploration in the Fayetteville Shale Play are two different things, but some of the struggles my constituents in this part of the state are having due to drilling can probably be avoided there if they're aware of what's happening here," said Rep. Shirley Waiters, R-Greenwood.

"We've seen everything from water contamination to the destruction of property to water runoff issues, and it's all been exacerbated by gas companies that have not been congenial to the people. They've been abusive to the property, torn down fences, let cattle out, not put things back as it should be and on and on."

The state could also look to Texas for guidance. The Barnett Shale Play near Fort Worth has a shale geology similar to the Fayetteville Shale Play, and hydraulic fracturing and the amount of water needed have been a big concern in the dry Texas climate. But water contamination does not seem to have been a particular problem.

The big companies currently exploiting the Fayetteville Shale Play, particularly Chesapeake Energy Corp. of Oklahoma City and Southwestern Energy Co. of Houston, are off to a good start as far as complying with current regulations, according to the ADEQ, even though the agency says current regulations are probably not up to par.

"The big ones are really good about complying, and some of the smaller companies--there's a bit of a learning curve," said Laura Stuart, a geologist for the Water Division at ADEQ.

"The problems are that, No. 1, Arkansas hasn't had to deal with the amount of requests and permitting that we [currently] have to do, and, No. 2, when there isn't one central place regulating and overseeing all of this, there is a demand for a lot of extra communication."

The larger energy companies are still working out the logistics of their water supplies, with Chesapeake experimenting with a retaining pond in White County and Southwestern Energy also leasing ponds from landowners. Companies also have agreements with some municipal water-supplying agencies.

"We are pleased with the many benefits we are seeing as the result of our strategy for obtaining water by building ponds to catch rainwater," said John Thaeler, senior vice president of Seeco Inc., a subsidiary of Southwestern Energy.

"These ponds are the property of the surface landowners and will be utilized by our company for several years to source water for operational needs. These new ponds provide the majority of our water now."

Water Tap

Water is a delicate issue in the Fayetteville Shale Play for several reasons. North-central Arkansas is home to several of the state's largest and cleanest bodies of water, like Greers Ferry Lake and the White River. Also, the farther east drilling progresses, the closer it gets to the Mississippi River Delta and its alluvial aquifer, which is tied to the drinking supply of more than 300,000 Arkansans, according to the Arkansas Natural Resources Commission.

Water is paramount for drillers because gas reserves deep in the shale can't be tapped without a process known as hydraulic fracturing. At each drilling site, millions of gallons of water--along with chemicals--must be injected into the ground at nearly 100,000 pounds per square inch to crack the shale, allowing trapped gas to flow freely back toward the well bore. "Proppants," such as a well-rounded type of sand, are then jammed into the fractures to keep them propped open for the gas to flow.

The water is then pulled back out of the well to maximize the benefits of the technique.

"If they don't get all of the water out, then it's a deterrent for the gas production, so it's in the interest of the operator to get out as much of that water as necessary for production purposes," said Ed Ratchford, an oil and gas supervisor for the Arkansas Geological Commission.

The Pits

Because nearly a million gallons of water are used per hydraulic fracturing job, environmental concerns surround the origination, storage and disposal of water used by gas drilling companies.

Each site has a reserve pit, a storage area with an earthen berm where most of the "drilling mud" and excess water from the site are stored.

This is where ADEQ's regulation begins. The agency says that 393 reserve pits were authorized in 2005, 630 in 2006 and already 252 so far this year.

"We try to make sure none of the contaminated water is left at the site and that there are no leaks or runoffs that might impact the environment," said ADEQ's Stuart. "We also sign off on a site once that water has been safely disposed of and the site is free of any damaged water."

Technically, Stuart said, there is only one way to correctly dispose of contaminated water, and that's at isolated "commercial disposal sites," which are wells that deposit the water back underground to unreachable depths. Those are regulated by the Oil & Gas Commission. The one disposal site closest to the Fayetteville Shale area is near Clarksville, Stuart said, with about seven other sites not near the Play and with "maybe three" coming online in the Fayetteville Shale region in the near future.

Larry Bengal, director of the Oil & Gas Commission, has not responded to repeated calls from Arkansas Business. Stuart said ADEQ has just five inspectors in the Fayetteville Shale region to handle complaints and conduct routine checks. She said the agency cannot track the number of complaints or violations, but she said there have been "quite a few."

Well, Well

Booneville residents like Stephen and Lawaynea Cox said that runoff from reserve pits has trickled down a hill to a creek near their property, leaving a bright red substance and a grimy coating on the formerly clear creek water.

They said that testing of their well water before drilling showed it was safe, but that recent tests have turned up a large amount of benzene and diesel, which can be traced to the drilling process. The water level and water pressure of their well are also lower, they said.

Waiters, the state representative for that area, said that even the well on her property has been compromised.

"Before drilling, our well was loaded with a sulfury water that was plentiful; I could water [the lawn] for days and even pump excess into our pond," she said. "After drilling, our water is now very clear, but there's such a little amount of it. We have not gotten the geologists to say whether or not drilling can hinder water wells, but we have had innumerable people saying their wells have changed."

ADEQ's Stuart said it hasn't been scientifically proven that drilling compromises private wells, but drilling combined with other factors is likely responsible for such problems.

"When you start drilling a lot of holes, you're going to run into problems," she said. "That may be true, and the drilling could have exacerbated that. ... [M]y opinion is that it's a combination of things--lower rainfall, drilling and the amount of water [the gas companies] are using, along with the large volumes they are trying to dispose of."

The Texas Commission on Environmental Quality recently released a first report on water usage in the Barnett Shale Play, giving the first glimpse of hard data after several years of drilling. The report concluded that the water district encompassing the Barnett Shale sold a total of 131 billion gallons, with only 248 million--0.19 percent of the total--being sold for fracturing purposes.

Some complaints regarding the gas industry's use of water also recently prompted the formation of the Barnett Shale Water Conservation & Management Committee, made up of 16 energy companies drilling there to develop the most efficient and safest ways to manage water use.

The Texas Railroad Commission, the sole regulatory arm of drilling at Barnett, issued more than 45 new water disposal site permits in that area since drilling began, compared with Arkansas' seven.

According to Cheryl Coon, an environmental lawyer in the Fort Worth area, the Railroad Commission is beginning to take a hard look at permits issued for disposal wells to avoid future contamination problems, though none has been reported.

Know the Drill

Oil & Gas Commission officials, including Bengal, visited Booneville in October to hear complaints from area residents.

"What they got was a whirlwind of about 150 people venting their problems all at once," said Patti Johnson, who lives on nearly 40 acres she said were being "destroyed" by gas companies. "They got more than they bargained for, I'm sure."

Walters, who said Bengal has done more for her constituents than anyone in the past, also said residents there need legislation regulating noise and water pollution and ensuring basic landowner rights. She said the gas companies have taken advantage of some landowners' rights and that it's a shame that legislation is needed for common courtesy.

"We got shot down big time by the oil and gas industry attorneys and lobbyists, who basically argue that if they're regulated too much, then they'll pack up and leave the state," Waiters said. "If things don't begin to change, residents in the Fayetteville Shale Play and the environment there will most likely be taken advantage of as well."

Rep. Pickett of Conway, who currently has legislation before the Public Health, Welfare & Labor Committee that demands a study of the environmental impact of gas drilling on the water supply in the Fayetteville Shale region, says she has encountered the same roadblocks.

"I'm not sure that the Legislature will meet on it or not," she said. "If we can pin people down, get them on board and try to work on the situation together, we might get somewhere. I've just had a hard time getting the focus on these issues."

The Health, Welfare & Labor Committee will meet on gas drilling issues at 1:30 p.m. May 17 at the state Capitol, where a representative from Earthworks, an environmental nonprofit based in Durango, Colo., that has been instrumental in updating drilling laws in several states, will also present.

"The Fayetteville Shale Play is obviously a great thing financially for Arkansas and for a lot of people in that area," said ADEQ's Stuart. "There's no question that because it's such a new thing, some of the regulatory and scientific and geological aspects will have to evolve as it grows to ensure that it's both environmentally and economically good for everyone."

By Nate Hinkel

nhinkel@abpg.com

SHALE PLAY (continued on Page 14)
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Author:Hinkel, Nate
Publication:Arkansas Business
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Date:May 7, 2007
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