High-volume horizontal hydraulic fracturing has not taken place in New York because estimates of the natural gas reserves in the state’s Marcellus and Utica Shale have been greatly exaggerated.
That was the takeaway from a talk given at SUNY Cobleskill by James “Chip” Northrup, a veteran oil and gas investor on Thursday, Oct. 17.
“Whether it’s good or bad, in New York State it’s moot,” said Northup, in the question and answer period following his presentation.
The talk was part of the college’s environmentally themed 7th Generation Lecture Series, which is part of the school’s honors program.
Northrup, who splits his time between Dallas Texas and Cooperstown, said that very little of the Utica and Marcellus Shale in New York State was suitable for natural gas development from a business and economics perspective.
Northrup said that if New York had as big a shale gas reserve as has been claimed, gas drilling would be in progress.
“If there’s a lot of shale gas……it tends to get developed.”\
Northrup also said that the major oil and gas companies had either not come into New York, or had pulled out.
“The major oil companies…..are not really interested in New York state.”
The reason he gave for this is that that the productivity of shale plays tend to be overestimated, in part due to a 2008 U.S. Securities and Exchange Commission rules change. According to Northrup, this rules change liberalized how companies could report on their undeveloped oil and gas reserves.
“It made it a lot easier to overstate oil and gas reserves,” said Northrup. “They could be overly optimistic.”
He also said that there was no third party oversight of these estimates, and that the nature of shale formations lent themselves to speculation.
Northrup said that one doesn't have a good idea about how productive different parts of a shale formation will be until they have been tested.
“Until you start to test it, you don’t know where it’s going to be productive.”
He then gave an example of a hypothetical company drilling multiple test wells in an area, but finding only one very good well. The company would then frack the very good well, and publicize its productivity, which would help them to flip the rest of the lease.
“That’s basically the one you take to Wall Street.”
Northrup said that in both the Haynesvile Shale play, primarily located in Texas and Louisiana, as well as the Marcellus Shale play in Pennsylvania, production was consolidated into a few regions, and was not uniform throughout either play.
“They talk a lot about the gushers,” he said, speaking of the media. “They don’t talk about the dry holes.”
As for estimates for New York, he said that while projections had initially estimated over 400 trillion cubic feet of gas in the entire Marcellus shale formation, which covers New York, Pennsylvania, Ohio and West Virginia, the U.S. Geological Survey estimated in 2011 that the Marcellus shale contained 84 Tcf. Nonetheless, Northrup said that the DEC continues to use the higher number in estimating the amount of recoverable gas in New York’s shale.
He said, however, that, based off the area’s geology, as well as the regulations being proposed for drilling in New York State, 80% of New York’s shale gas reserves are not recoverable. With this in mind, he said that a realistic estimate of recoverable gas is 4.2 Tcf, based off the USGS data.
Northrup said that the Trenton-Black River Shale formation, which is located above the Marcellus and Utica Shale, has been tested extensively. These tests also gathered data on the Marcellus and Utica Shale and, according to Northrup, they show that, aside from some areas on the New York border, the Marcellus and Utica shale in upstate New York is not suitable for fracking.
“It’s not likely to be productive much outside of Broome,” said Northrup, who said that such production would be characterized as below average in Pennsylvania.
This conclusion was based off cross referencing the Trenton-Black River data with data generated from gas drilling in Pennsylvania.
As for Chenango and Otsego counties, Northrup said, “It won’t even be drilled up here.”
Indeed, Northrup said that there was only one viable drilling permit with stable financing behind it in New York currently, and that permit was in Delaware County near a trout stream. It is also in the Delaware River Basin, which currently has a moratorium on gas drilling separate from New York State’s moratorium on high-volume horizontal hydraulic fracturing.
He also said that surveys of New York’s Marcellus Shale showed that much of it was too thin to drill, and that tests of the Utica Shale had shown it to be unproductive, pointing to the recent bankruptcy of Norse Energy Corp., which bought up a large number of Utica Shale leases, and tested on them extensively.
“They basically hit dry holes,” said Northrup.
Northrup said that much of the support for natural gas drilling in New York is based around wishful thinking,
“Discount shale gas as being the salvation of the southern tier,” he said.
Even in the areas that could be drilled productively, Northrup said that drilling would not create local jobs.
“No locals are going to get hired to drill a wildcat well.”
He also said that there were dangers from gas drilling even in areas without productive gas reserves.
“Dry holes pollute,” said Northrup. “They can leak just as bad as a producer.”
He also talked about the damage that could be done to roads, and the issue of frack waste, which can legally be dumped on New York roads.
Northup argued that Governor Cuomo knows that New York has poor gas reserves in its Marcellus and Utica Shale, which was why he has been delaying drilling.
In the question and answer period, Northrup stressed the need for people to get involved on the local level if they wanted to oppose fracking. He also voiced his objections to compulsory integration, and said that he had no position on the Constitution Pipeline. He did say, however, that he did not think the pipeline was a stealth tactic to bring fracking to the area.
When asked about the end game for fracking in New York state Northrup said, "I don't think anything's going to happen in (the next) twenty years."
Northrup will join former Mobile executive Lou Allstadt, systems engineer Jerry Acton and beologist Brian Brock for a presentation at Cornell on Oct. 30. This presentation will focus on the Marcellus and Utica Shale in New York, and its potential for natural gas production, and will be moderated by Dr. Tony Ingraffea, a professor of engineering at Cornell. It will begin at 7 p.m. at the Hollister Hall Auditorium.
The 7th Generation Lecture Series brings three environmentally focused lectures to SUNY Cobleskill's campus every semester. The next lecture will be in December, and will focus on back yard birds. The program is in its fifth semester.