Let’s go out on a limb and say this is not a coincidence: just days after the Pennsylvania Department of Environmental Protection disclosed 243 cases of contamination from oil and gas drilling operations, a major drilling company has voluntarily dropped an attempt to force its operations upon unwilling property owners in the Utica shale formation.
The decision to back off is a huge deal because the company in question, Hilcorp Energy Company, would have been the first to use Pennsylvania’s longstanding “forced pooling” law in a shale formation. So, that pretty much shuts the door on that.
Forced Pooling In Pennsylvania
For those of you familiar with oil and gas operations, the idea of forced pooling is no surprise. It’s a legal arrangement that enables drilling companies to extract oil or gas in a given area, once they bring a certain number of willing property owners under lease.
Forced pooling has been in widespread use for generations (the Pennsylvania law dates back to 1961), but fracking water contamination and other fracking issues have been raising new red flags, so when Hilcorp began leasing an area in the Utica shale, four property owners balked.
The fact that Hilcorp backed down against just four small property owners is significant because Hilcorp Energy is no small potatoes. The Fortune 500 company bills itself as “one of the largest privately-held independent oil and natural gas exploration and production companies in the United States.”
In other words, one of the biggest, most deep-pocketed operators in the country just tried to test forced pooling against a handful of property owners, and it failed.
The case is also significant because it has tested the limits of Hilcorp’s business model. Although the company got its start in 1989 with a focus on conventional drilling, it appears to have become an aggressive participant in the fracking boom.
Here’s a couple of snippets from the company website:
Operating across the United States, Hilcorp continues to grow by actively acquiring and exploiting conventional assets while expanding its footprint into a number of new resource plays.
In fact all of our operations are in the United States, a vast majority of which Hilcorp acquired from other companies. Often times companies sell to us simply because their priorities have changed or bigger, more exciting opportunities become available. That is where we come in…Hilcorp specializes in efficiently developing energy that would otherwise have been lost.
…Over time, and for various reasons company investments in certain areas decline. It’s that decline that leaves behind opportunity for Hilcorp to revive operations…
That description dovetails with Hilcorp’s aggressive push into the Utica shale, as reported at length by triblive.com in October 2013:
State records show companies drill about 100 horizontal wells a month into the Marcellus. The Utica’s depth in Pennsylvania makes it more expensive to reach, but it’s rich enough with gas to make it potentially profitable.
Okay, so much for that. As for the general issue of fracking contamination, the Associated Press has been doing a bangup job of reporting on earthquakes and other impacts of gas and oil fracking, and their latest effort was a big catch.
Last week, without public notice, the Pennsylvania DEP posted a list of 243 properties affected by water contamination linked to oil or gas drilling, dating back to 2008. The list includes conventional as well as fracking operations.
That didn’t escape AP’s notice. In an article picked up on wsj.com, AP noted that it is among a number of news outlets that have filed lawsuits and formal requests for documents regarding Pennsylvania’s handling of complaints related to fracking and other drilling operations.
AP also notes that DEP’s record-keeping leaves a lot to be desired, so there may be many other cases that have not been properly documented or reported.
Be that as it may, we checked out the list and it has handy links to each document, so you can see the range of problems for yourself (here’s the link again). As summarized by AP that includes methane contamination and other well-related issues that could stem directly from drilling operations, as well as spills and other surface issues.
Many of the cases are still unresolved. Of those that have been subject to a consent order, you can find one example near the top of the list (here’s that link). In that case, DEP found that drilling operations by the company Cabot Oil & Gas Corporation was responsible for negative impacts on 18 different wells serving 19 properties in Susquehanna County (if that rings a bell, Cabot’s fracking activities in the town of Dimock have been the subject of an intense fight).
When you put two and two together, you come away with the feeling that Pennsylvania’s fracking boom is heading for a fall. The Hilcorp decision could be just the start of a pullback as more information on the impacts of fracking comes to light.
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