February 22, 2010

By Scott McKay

Original Article

It’s not a surprise, as we’ve repeatedly warned that it was coming, but last week the House Energy and Commerce Committee sent letters to eight natural gas producers questioning them about the chemicalsthey use in their “drilling mud” while engaging in the practice of hydraulic fracturing, or “fracking” – a 50-year-old procedure which combined with the innovation of horizontal drilling has unlocked vast natural gas resources in areas like North Louisiana’s Haynesville Shale.

Congressman John Fleming, M.D.

March 4, 2010

Original Article

In northwest Louisiana, we are blessed with an abundance of natural resources. Chief among them is the Haynesville Shale, one of the largest natural gas reservoirs discovered in recent history.

Some estimates have projected the Haynesville Shale contains 234 trillion cubic feet of natural gas production potential. To put that into perspective, the total consumption of natural gas in 2008 in the United States was 23 trillion cubic feet.

These estimates would make the Haynesville Shale the largest natural gas play in the United States and one of the largest in the world and the equivalent of about 18 years of U.S. oil production. The Haynesville Shale houses some of the largest producing wells in the continental United States, with some producing 10 million to 20 million cubic feet of natural gas per day.

In 2008 alone, production in the Haynesville Shale pumped $4.5 billion into Louisiana’s economy with some local governments reporting 300 percent increases in sales tax revenue. In addition, more than 32,000 jobs across multiple industries were created because of activities related to the Haynesville Shale.

This enormous economic impact would be impossible without hydraulic fracturing, the technology that lets producers reach the natural gas. Hydraulic fracturing is a state-regulated process that involves pumping a mixture of water and sand into rock formations miles below the Earth’s surface, where the gas is trapped, to allow it to escape and flow up the well.

Hydraulic fracturing has been used for more than 60 years and is responsible for 30 percent of America’s recoverable oil and natural gas. And of wells operating today, more than 90 percent have been fractured at least once.

Democrat Reps. Henry Waxman, of California, and Ed Markey, of Massachusetts, — the same team that brought you the job-killing, tax-hiking cap-and-trade legislation — appear to be trying the same tactics on natural gas production with recent committee action aimed toward giving the Environmental Protection Agency (EPA) unprecedented power to enact oppressive regulations on hydraulic fracturing.

This action would have a far-reaching negative impact on energy producers and consumers alike, particularly in formations such as the Haynesville Shale that depend on hydraulic fracturing to produce.

Let me be clear. I support environmental responsibility and know the critical importance of protecting our drinking water.

But like many policies making their way through Congress these days, bigger, expansive and intrusive bureaucratic red tape will not make us more environmentally responsible.

For years, hydraulic fracturing has been safely and effectively regulated by individual states. In Louisiana, three different agencies have oversight related to hydraulic fracturing, and these agencies already work closely with existing federal regulations under the EPA.

I am deeply concerned that adding additional layers of regulations to hydraulic fracturing would not only result in a sharp increase in costs to small and independent producers, it would dramatically decrease output and job creation. Production would essentially grind to a halt, and billions of dollars in federal and state tax revenue would be at risk, all in the name of environmental concerns that are already being addressed.

If Congress is serious about tackling this country’s energy crisis and ending our dependence on foreign oil, then it is crucial they recognize what resources, such as the Haynesville Shale, will play in our long-term economic and national security. More burdensome federal regulation will only serve to hinder production and feed this country’s addiction to foreign energy.

John Fleming, a physician and small business owner, represents the Louisiana’s 4th Congressional District and is a member of the House Armed Services and Natural Resources committees.

February 18, 2010

By Matt Ross, LOGA

Introduction

Hydraulic fracturing, also known as “hydrofracking”, is a well-developed and refined engineering technique that results in the creation of fractures in rock formations.  Specifically, hydrofracking occurs after the drilling process has completed and a temporary wellhead has been installed.  The process involves pumping water, sand and chemicals into the wellbore under extremely high pressure.  The mixture is then forced out through perforations in the production casing into the targeted rock formation.  This pressure inevitably results in the fracturing of the shale formation.  The ultimate goal of the process is to create a “fairway” connecting the reservoir to the well and allow the released gas to flow to the wellbore.

(This image can be found at ProPublica – What is Hydrofracking?)

Hydraulic fracturing has played a significant role in the oil and gas industry for over 60 years and is responsible for 30% of America’s recoverable oil and gas.  This complex technique has become an exceptional tool in stimulating and increasing oil and natural gas production from unconventional and low permeability reservoirs.  Many may not be aware, but this process has been a part of the oil and gas industry for quite some time.  In fact, most wells drilled in the continental United States rely on the use of hydraulic fracturing to ensure optimal production.    It’s estimated that this technique has been responsible for nearly 7 billion barrels of oil and 600 trillion cubic feet of natural gas production.  The National Petroleum Council reports that 60% to 80% of all wells drilled in the next ten years will require the use of hydraulic fracturing to remain economic and profitable.

How Safe is Hydrofracking?

Recently, there has been much discussion concerning the safety of hydrofracking and its potential for groundwater contamination.  Currently, some members of Congress are pushing to place the regulation of hydraulic fracturing in the hands of the federal government under the Safe Drinking Water Act (SDWA), a law that was never intended for this purpose. It is important to note that in the 60 years of use, hydraulic fracturing has not been shown to pose any discernable risk to drinking water.  Of the more than one million wells fractured, not a single case of drinking water contamination has ever been recorded.

For decades, this process has been safely and effectively regulated by individual states.  The Interstate Oil and Gas Compact Commission (IOGCC) has reaffirmed their strong stance that the states remain the best positioned to regulate the use of hydraulic fracturing.  According to Carl Michael Smith, IOGCC executive director, “The states do a superb job of protecting human health and the environment through sound regulation.”  In his opinion, “An unnecessary shift to federal regulation of hydraulic fracturing could greatly inhibit the production of much-needed oil and natural gas resources at a time when our nation’s energy security is critical.”

In the state of Louisiana, three different agencies have oversight related to this process:

• The Office of Conservation of the Louisiana Department of Natural Resource
• Louisiana Department of Environmental Quality
• Department of Health & Hospitals

While effectively regulating this process, these agencies work closely in association with existing federal regulations under the EPA.

Haynesville Shale

In the case of the Haynesville Shale, it is important to understand exactly how deep the process of hydrofracking occurs from fresh water zones and the surface of the earth.  Fresh water aquifers are located relatively close to the surface.  In the Haynesville shale, for instance, the Carrizo-Wilcox aquifer is found at approximate depths between 200 and 600 feet.  The practice of hydrofracking takes place depths of over 10,000 feet or roughly 2 miles.  To put this into perspective, the distance between the aquifer and the process of hydrofracking is equal to about 33 footballs fields or 8 Empire State Buildings stacked on top of each other.

(Image provided by IPAA – Click here for enlarged image)

Current industry practices and existing state regulations ensure multiple levels of protection between any sources of drinking water and the production zone of an oil and gas well.  To ensure that drinking water aquifers are protected from any substance that could enter the water supply, steel casing and cement surrounds the wellbore at depths of 1,000 to 4,000 feet.

By law, the Louisiana Office of Conservation requires all oil and gas companies to set protective surface casing well beyond the water table.  For example, in the Haynesville Shale, surface casing must be set at a minimum of 1,800 feet.

(Image provided by API)

During the process of setting surface casing, the space between this first casing string and the wellbore is filled with cement.  The casing, cement specifications and cementing process are all governed by state and federal regulations as well as industry standards.  For example, oil and gas companies are mandated by law to test the viability and pressure of the surface casing.  If pressure is lost or an adequate cement bond is not achieved, the producer must start over the process of setting surface casing until a proper seal has been established.  In every case, these processes are closely supervised by all of the above mentioned state agency officials.

Hydraulic fracturing is a vital and necessary part of Louisiana’s oil and gas industry.  Our industry remains committed to safely and economically producing fossil fuels for our domestic energy needs.  Through new developments like that of the Haynesville Shale, communities have been injected with billions of dollars in capital and provided with thousands of good paying local jobs.  By strictly adhering to state regulations and industry practices, the oil and gas business will continue to be one of our most important economic engines and always strives to be good stewards of our environment.

If you would like more information regarding drilling or the process of hydrofracking please feel free to view our in-depth animated video and analysis – (Click here)

March 1, 2010

Original Article

EXCO Resources Inc. has hiked gross production to 340 MMcfd in its Haynesville shale 50-50 joint venture with BG Group PLC and has begun horizontal drilling in the Marcellus shale.

The Haynesville output, tallied on Feb. 7, came from 34 operated wells drilled with an average of seven operated rigs and compared with 7 MMcfd in the 2008 fourth quarter. EXCO-BG holds 107,800 net acres, up 22,800 net core area acres since forming the joint venture.

Net Haynesville production was 96 MMcfd as of Feb. 7 compared with 47 MMcfd in the fourth quarter of 2009 and 6 MMcfd in the fourth quarter of 2008.

Capital spending for 2010 is budgeted at $255 million net to EXCO to drill 115 operated and 23 nonoperated wells. The operated wells include 95 Haynesville shale horizontals, seven Bossier shale horizontals, six Cotton Valley horizontals, and seven wells in the Vernon, La., area. In the EXCO-BG area of mutual interest, spending will total $741 million net to the joint venture.

TGGT Holdings LLC, a 50-50 joint venture with a BG Group affiliate, had averaged throughput of more than 850 MMcfd. In the 2009 fourth quarter TGGT completed the first of four stages of a 29-mile, 36-in. header system through the Holly field area to gather and deliver the companies’ Haynesville gas to interstate pipelines.

Operations began Nov. 30, 2009, on the system, which will eventually have a capacity of 1.5 bcfd. TGGT averaged 474 MMcfd in 2009, and throughput now exceeds 850 MMcfd.

EXCO-BG increased the operated horizontal rig count to 13 in the Haynesville and plans to raise that to at least 14 for the rest of the year. It also plans to run at least one operated horizontal rig in Appalachia throughout 2010. Current companywide rig counts are 17 operated and four nonoperated.

As EXCO sold assets and reorganized around the shale plays in 2009, it added 242 bcf of gas equivalent (bcfe) of proved reserves through the drill bit and produced 128 bcfe. The majority of the new reserves resulted from 2009 Haynesville horizontal development where the company ran an average of six operated rigs for the year and completed 25 operated wells.

EXCO cut the average gross cost of an operated Haynesville horizontal well 25% to $9.5 million in 2009 and expects 2010 well costs to continue at or below that level. Drilling days were cut nearly in half from 72 days for the early wells.

Under new Securities and Exchange Commission rules, EXCO added an average of 2.5 offsetting proved undeveloped locations with average gross reserves of 6.6 bcf for each producing well drilled. Under the former rules, it would have added an average of 1.6 offsetting proved undeveloped locations.

EXCO-BG is investing in two major water projects. One will enable it to use discharge water from an industrial plant as a key water source for hydraulic fracturing. This will lessen the impact on local water supplies, reduce truck traffic, and provide an environmentally safe option for water procurement.

The joint venture also has a salt water management project to transport service water and gather produced water across its acreage, reducing truck traffic and handling water much more efficiently and more cost effectively.

EXCO-BG’s first horizontal Haynesville well, Oden-30H6 in DeSoto Parish, La., has sold 3.2 bcf in its first year on production. The JV’s average operated well IP in the DeSoto area is 22.8 MMcfd.

EXCO is encouraged by Bossier test results in four vertical Haynesville wells from 2008 and is drilling its first horizontal Bossier well with seven Bossier horizontals planned in East Texas and North Louisiana in 2010.

It has greatly reduced activity in the Cotton Valley, Hosston, Travis Peak, and Pettet conventional horizons but does plan a six-well horizontal testing program in Cotton Valley in DeSoto and Caddo parishes to check the feasibility of a larger program in 2011 and beyond. It plans 28 mainly Hosston recompletions in DeSoto.

EXCO holds more than 654,000 net acres in Pennsylvania and West Virginia, of which 343,000 are believed prospective for Marcellus and Huron shale gas and 186,000 are in the overpressured Marcellus fairway. Negotiations are under way for a further 42,000 net acres.

The 2010 capital budget is $154 million for drilling, land, seismic, midstream expansion, and operations. About 70% of the fairway acreage is held by shallower production in Clinton-Medina and stacked Devonian sandstone, Devonian shale, Berea shale, and other horizons.

BY DEBORAH B. BERRY

GANNETT WASHINGTON BUREAU

MARCH 1, 2010

Original Article

WASHINGTON — U.S. Rep. John Fleming is blasting Democrats on a House committee for launching an investigation into the safety of hydraulic fracturing.

“The same team that brought America the job-killing, tax-hiking cap-and-trade legislation appear to be at it again,” Fleming, R-Minden, said in a speech last week on the House floor.

Rep. Henry Waxman, D-Calif., chairman of the Energy and Commerce Committee, recently wrote to eight oil and gas companies, questioning them about the chemicals they use for hydraulic fracturing, a process that uses pressure from water-based fluids to extract natural gas from shale.

Waxman said it’s important to determine the environmental impact of the process, particularly on drinking water. Environmental groups have raised concerns about chemicals used in the process.

Some lawmakers have proposed legislation to regulate the process, and the federal Environmental Protection Agency plans to study it.

Fleming, a member of the Natural Resources Committee, said the actions could have a “far-reaching negative impact” on consumer and energy producers, including Haynesville Shale.

He said that in 2008, production in the Haynesville Shale pumped $4.5 billion into Louisiana’s economy and created more than 32,000 jobs.

He said the extra federal regulation would increase costs, reduce production and eliminate jobs.

“Production would essentially grind to a halt, and billions of dollars in federal and state tax revenue would be at risk,” he said.

Don Briggs, president of the Louisiana Oil and Gas Association, called the investigation into fracturing a “witch hunt.”