Now a law: Texas measure makes local oil regulation illegal (with NPR audio)

“To these folks I say, ‘Ride your horse to work every day.'”
-Todd Staples, President, Texas Oil and Gas Association

Texas Governor signs bill banning local bans
It’s finally happened. Texas Governor Greg Abbott on Monday signed a law barring Texas cities from regulating oil and gas drilling, effectively ending a voter-approved fracking ban passed last November by the city of Denton.

House Bill 40 prohibits cities from enacting any ordinance “that bans, limits, or otherwise regulates an oil and gas operation within its boundaries or extraterritorial jurisdiction.”

According to bill sponsor Representative Drew Darby, only the Texas Railroad Commission (the Texas equivalent of the Montana Board of Oil and Gas Conservation) can regulate oil and gas drilling in Texas. The law “expressly preempts” cities from doing so.

The reason why this is important to us in Montana is that the Texas law is the first salvo in a nationwide effort by the oil and gas industry to take away the rights of landowners by blocking their rights to regulate what happens in their own communities. According to the Wall Street Journal, “similar efforts are cropping up in New Mexico, Colorado, Ohio and Oklahoma”.

It makes sense for local communities to establish rules like setbacks from residences. Photo: Spencer Platt, Getty Images

It makes sense for local communities to establish rules like setbacks from residences. Photo: Spencer Platt, Getty Images

It is essential for Montanans to act now to protect their rights by enacting local legislation to make sure that any oil drilling is done as safely as possible.

The oil industry’s brazen disregard for landowner rights is summed up in this recent story from NPR, entitled New Texas measure makes local fracking bans illegal. In the story, which you can listen to below, Todd Staples, president of the Texas Oil and Gas Association, comments, “You know, I think we have people in our nation and even in Texas that are really just anti-oil and gas. And they would like to see that production stopped. To those folks, I say, ride your horse to work every day.”

Some industry’s are just disdainful of the rights of communities.

You can listen to the NPR story below.

Previous posts on the fracking ban and Texas politics:
Lessons from Tuesday’s election, November 6, 2014
Denton, Texas lawsuit: Lessons for the Beartooth Front, December 1, 2014
A personal story: Cathy McMullen, Denton, Texas, December 5, 2014
Texas legislature seeks to undermine Denton fracking ban, April 23, 2015
Beware: The oil and gas industry has a national game plan to limit local regulation of drilling, April 29, 2015
Editorial: Fracking bill sets dangerous precedent (with video), May 18, 2015

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Salt water spills require local regulation to protect farmers and ranchers

Farmers and ranchers in the Bakken have had an uneasy peace with the oil industry since the fracking boom started. Many receive royalty payments based on their ownership of the minerals under their land, and so they have been relatively tolerant of the problems related to drilling.

But a problem has arisen that has brought farmers and ranchers into direct conflict with the oil industry. It is an issue that we should be aware of along the Beartooth Front, because it speaks directly to the need for local regulation to protect Montana communities.

According to the Wall Street Journal (subscription required), the problem is salt water brine leaking from pipelines. There have been at least eleven such spills of this “produced water” on the North Dakota side of the Bakken in 2015 alone, including:

  • A spill in January that allowed nearly three million gallons to spill near Black Tail Creek north of Williston before it was discovered
  • An Oasis Petroleum Inc. pipeline leak earlier this month that state officials say involved some 630,000 gallons of brine spilled on grazing land into a tributary of a lake
  • A spill last week that caused 220,000 gallons of brine to leak onto the Fort Berthold reservation
This spill near Williston released nearly three million gallons of produced water onto surrounding farmland. Photo: Chester Dawson, Wall Street Journal

This spill near Williston released nearly three million gallons of produced water onto surrounding farmland. Photo: Chester Dawson, Wall Street Journal

“There’s probably nothing more toxic to land than salt water,” said Troy Coons, a farmer and chairman of the Northwest Landowners Association, an agriculture group.

Last year on this site we told the personal story of Steve and Jacki Schilke, whose farm near Williston was devastated for years because of a produced water spill.

It’s important to understand that these are not oil pipeline spills like the ones that have occurred under the Yellowstone River. These spills involve the transport of “produced water” from wells. According to the USGS, “20-30 billion barrels of produced water are generated by oil and gas production operations in the US each year. This is 70 times the volume of all liquid hazardous wastes generated in the US.”

What is particularly upsetting to farmers and ranchers is that there are technologies available to monitor these pipelines and identify leaks, but there are few regulations that require this to be done. The network of produced water pipelines is so extensive that oil-producing states just can’t keep up in the face of industry opposition to regulation.

For example, the Wall Street Journal reports that the January leak that released nearly three million gallons before it was discovered was a “six-month-old pipeline that had a monitoring system to detect leaks, but nobody turned it on amid a boom-fueled rush to lay more pipe, according to both state officials and an executive with the company that owns the line, Summit Midstream Partners LLC of the Woodlands, Texas.

“We have laid so much pipe and had turned on so many sites that we just hadn’t gotten to that yet,” said John Millar, a vice president at Summit in charge of developing and managing pipeline.

Montana has minimal monitoring requirements for these pipelines
While North Dakota passed legislation in April that requires plans for leak detection and monitoring, third-party inspections and increased disclosure of engineering plans, these plans will not be broadly enforced, and penalties are limited to $12,500 per day.

But these enforcement measures are much more demanding than the rules that exist in Montana today. Montana’s pipeline safety rules are general and often decades old. You can find them here, but the law specifically regarding inspections and violations will give you a sense of how toothless they are:

38.5.2204    INSPECTIONS, INVESTIGATIONS, AND REPORTING

(1) The commission, its employees, or authorized agents, have the power to investigate all methods and practices of pipeline owners and operators; to require the maintenance and filing of reports, records and other information in the form and detail as the commission may prescribe; to enter upon and to inspect the property, buildings, plants, and offices of pipeline owners and operators; and to inspect books, records, papers and documents relevant to enforcement responsibilities under the NGPSA.

(2) The commission, a staff member thereof, or some person appointed by it, may investigate and make inquiry into every incident occurring in the operation of any intrastate gas pipeline located in this state. The commission, in its discretion, may also investigate any other accident or event involving the operation of a pipeline.

It is worth noting that Governor Schweitzer, in the wake of the Yellowstone pipeline spill involving the Silvertip Pipeline, formed the Montana Oil Pipeline Safety Review Council by executive order, but this body is concerned only with oil pipelines, not produced water pipelines.

What it means for us along the Beartooth Front
If drilling expands along the Beartooth Front, there will need to be pipelines built to transport produced water. Since Montana law does not effectively regulate these pipelines, they will not be appropriately monitored or inspected, and there will not be a requirement to use technology that will make them safer

When these pipelines are built, there will only be one way to regulate them — through local zoning. It is entirely appropriate to do this — there is no reason that operators should not be held to best practices by local communities interested in protecting farm and ranchland from unnecessary contamination.

Oil extraction technology has changed dramatically over the last decade. Montana state law has not caught up, and it is clear that the state legislature has no interest in moving quickly to protect local communities.

This is why landowners along the Beartooth Front are moving lawfully to set up local zones that will protect them.

You should support them.

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Editorial: Fracking bill sets dangerous precedent (with video)

Cathy McMullen, Denton Drilling Awareness Group

The Denton ban passed 59-41 last November

With the news that Texas Governor Greg Abbott is about to sign HB40, a “ban of bans” that will prohibit local communities in that state from enacting oil and gas drilling ordinances, it’s exciting to see that  the fight hasn’t gone out of local organizers of the Denton ban campaign.

They’ve just released a preview cut of an  upcoming feature-length documentary that chronicles the battle for local control called “Don’t Frack With Denton.”

The documentary tells the empowering story of how an exploited but tenacious and creative town managed to upstage the oil and gas industry deep in the heart of Texas with the power of music and community organizing. Together and against all odds they won the very first ban on hydraulic fracturing in the state right on top of the same shale where fracking was first invented.

Oil and gas industry response
What the oil and gas industry has done in response is to push a bill making community control illegal, and that is the bill that sits on Governor Abbott’s desk.

Meanwhile, the Rockwall County Herald Banner, a newspaper based just east of Dallas, has clearly articulated what is wrong with this bill. The paper ran this editorial in Sunday’s paper, and I print it here in its entirety for your review.

Like Denton, Rockwall County is not a liberal hotbed. Its voters send Republicans to represent them in the legislature. But the editorial recognizes the danger of removing local control over how oil and gas drilling takes place in individual communities, and the hypocrisy of taking away individual rights to appease the oil and gas industry.

These are lessons we should take to heart in Montana and specifically along the Beartooth Front, where local zoning is essential to preserving the long-term economic, environmental and cultural health of our communities.

The bill that sits on Governor Abbott’s desk comes out of the oil and gas industry’s national playbook, and a nearly identical bill will likely be sitting on Governor Bullock’s desk in 2017.

The editorial:

Fracking Bill Sets Dangerous Precedent

The Texas Legislature has sent a bill to Gov. Greg Abbott’s desk that would keep cities from banning hydraulic fracturing, commonly known as fracking.

The legislation, which received significant support from the oil and gas industry, prohibits cities from enacting bans on oil and gas operations within their cities limits or extraterritorial jurisdictions.

It sets a dangerous precedent, enhancing state power while limiting the power of a municipality to control what happens within its own borders, which also reduces the level of control local residents have over what occurs in their backyards.

Fracking is already a controversial issue, with detractors claiming it contaminates ground water and leads to an increase in seismic activity. Water is already a precious commodity in Texas, and giving oil and gas companies free reign to potentially pollute it does not sound like a good idea.

Regardless of how significant an impact fracking has on the environment, local municipal leaders should be able to decide whether they want to allow fracking in their city.

Local control should not be taken away by the federal or state government except in extreme situations when it is absolutely necessary. This situation definitely does not meet that criteria.

The state of Texas is built upon the concept of home rule, which empowers local municipalities with more than 5,000 residents to make their own decisions, rather than have all of their actions dictated by the state government. Smaller governmental bodies are more receptive to input from local citizens, granting more control to those citizens.

Removing this control in order for oil and gas companies to be able to make more money is not what our legislators should be concerned about. Access to reserves of energy is important, of course, but it is an important enough decision for municipal governments to make on their own, without the state telling them what to do.

Conservative legislators have triumphed smaller government and criticized the federal government for overstepping its bounds by compelling the state to accept legislation, such as the Affordable Care Act.

These same legislators are willing to pass a bill that would strip municipal governments of control within their own city limits. Ideologically, it does not make any sense, unless you factor in the deep pockets and significant political influence of oil and gas companies.

Engaging in fracking in Texans’ backyards is a privilege, not a right, and a privilege that should be granted by the people who are going to be enduring the possible effects of such behavior, not those who profit from it.

To find out more
We’ve been writing about Denton for several months. It’s an important story from the standpoint of community organizing, but also very useful in understanding the power of the oil and gas industry to push legislation that challenges the ability of local communities to control the terms of economic development on their own land. This is a lesson we should heed in our work along the Beartooth Front.

Previous posts on Denton:
Lessons from Tuesday’s election, November 6, 2014
Denton, Texas lawsuit: Lessons for the Beartooth Front, December 1, 2014
A personal story: Cathy McMullen, Denton, Texas, December 5, 2014
Texas legislature seeks to undermine Denton fracking ban, April 23, 2015
Beware: The oil and gas industry has a national game plan to limit local regulation of drilling, April 29, 2015

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From Washington to Helena, we subsidize the most profitable oil companies with billions of dollars of unnecessary tax breaks and direct subsidies

Oil companies are among the largest and most profitable corporations in the United States, and yet our government gives them billions of dollars in tax breaks and subsidies, many of these sponsored by elected officials who receive huge contributions from the industry. From Washington to Helena, we support fossil fuel producers at the expense of the communities in which we live.

OilProfits-table1Oil companies are the most profitable in the US
Let’s start by looking at the incredible size and profitability of Big Oil. These companies are hugely profitable, as you can see by clicking on the chart at right — the five largest oil companies in the United States earned $93 billion in profits in 2013. On the 2012 Fortune 500 list of the largest US companies by revenue, ExxonMobil ranked first, Chevron third, and ConocoPhillips fourth. HUGE companies.

Despite the size and enormous profitability of Big Oil, the US has showered $470 billion in tax subsidies on the industry since Marathon Oil began drilling in Carbon County, Montana 100 years ago. Many of these subsidies are rooted in oil and gas issues that are a century old, but Congress continally renews them as the oil companies keep pouring those dollars back into lobbying and direct campaign contributions.

Click to download copy of TCS brochure

Click to download copy of TCS brochure

The tax breaks
According to a 2014 brochure produced by Taxpayers for Common Sense (TCS), a nonpartisan federal budget watchdog organization, the largest oil and gas companies pay an overall tax rate of about 20%, barely half of the overall corporate tax rate of 35%. Major tax breaks include:

  • Intangible drilling costs (IDC) deduction. IDCs are the costs of designing and fabricating drilling platforms, as well as direct “wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production.” These costs can represent 60-80% of the cost of drilling a well, and the IDC deduction allows them to be deducted immediately.

The IDC deduction is a historical artifact. First granted in 1913 and passed into law by Congress in 1916, they were enacted because drilling for oil was once a very risky business. In those days start-up costs were high, and prospectors couldn’t be sure they’d find oil. To encourage the fledgeling oil industry, Congress approved the IDC deduction for the first year of a well’s life. Today sophisticated technology makes the likelihood of a dry hole minimal (follow the timeline of Energy Corporation of America’s well exploration in Belfry), but the deduction remains. Annual cost to taxpayers: $700 million to $3.5 billion

  • Special percentage depletion allowance. Theoretically, depletion is similar to the depreciation deduction for the capital cost of plant and equipment; the costs are deducted from income before the net income is taxed. This deduction should allow recovery of the cost of leases for oil and gas wells, and should approximate an accurate deduction of capital costs

But that’s not the way it works in practice. In the tax code depletion has been completely severed from the concept of recovering the capital cost of oil production. It effectively makes a certain portion of gross income tax-free without regard to capital costs.

According to Mother Jones, here’s how a 1959 newspaper article described the use of the special percentage depletion allowance as it was used by a trio of movie stars:

Jimmy Stewart, Bing Crosby and Bob Hope take their salary and invest it immediately in oil. If oil is hit, cost of drilling is deducted and 27.5 percent depletion is taken off the top with no taxes. If the well is dry, cost of drilling is deducted before taxes. This is called “drilling with tax money.”

And in the 1956 film Giant, James Dean explains it this way:

James Dean: Bale, l’ll tell you what old Pinky thinks….That oil tax exemption is the best thing to hit Texas since we whooped Geronimo. One of the finest laws ever passed in Washington.

The percentage depletion has changed over time, but it still allows deduction of 100% of the profit from a well. Percentage depletion was first passed by Congress in 1926. Today it’s annual cost to taxpayers is $612 million – $1.1 billion.

  • Domestic Production Activities Deduction. Included in the American Jobs Creation Act of 2004, this deduction amounts to about a 2% reduction in tax for manufacturing costs that could be imported overseas.

While this makes sense for a variety of goods that could be exported, it makes little sense in the oil industry. The jobs associated with producing oil from domestic wells cannot be exported in the same way that jobs producing consumer goods might. You can’t, after all, import jobs extracting oil from a Bakken well to China. The annual cost to US taxpayers of this exemption is $574 million.

Cutting the three exemptions above was a key part of the Obama Administration’s FY2013 budget proposal. It was defined as a way to increase federal revenues by $22 billion from 2013-17, as described in this chart:

chart_Federal tax proposal

I doubt that you will be surprised that this proposal was ignored by Congress.

There are many other oil and gas exemptions in the Tax Code. The TCS brochure goes into nine of them in detail, and I recommend you download it and read it if you’re interested in how Congress continues to subsidize Big Oil.

This chart summarizes how Big Oil benefits from these ongoing tax breaks today, and have over the last century:

Source: Mother Jones

Source: Mother Jones

Helena chips in
Since 1999 the Montana legislature has granted a huge additional subsidy in the form of a tax holiday to oil and gas producers. Operators pay a tax of only 0.5 percent of the production value of a well for the first 12 months of production on all wells and 18 months on oil and gas from horizontally drilled, or fracked wells. The tax rate set by law is 9 percent.

Oil well production over time. Click to enlarge

Oil well production over time. Click to enlarge

The reason the holiday is set for 18 months is that, for a horizontal oil well, the vast majority of the production occurs in the first 18 months. As you can see from this graph, production declines by 69% in the first year alone, and by about 80% after 18 months.

In a nutshell, the 18 month holiday is pretty close to a free pass on any significant taxes on a horizontal oil well.

In the most recent legislative session SB374, introduced into the Senate Taxation Committee by Senator  Christine Kauffman of Helena, would have imposed a “trigger” on the current tax holiday that would require oil and gas companies to pay the full 9% tax when the price of gas rises above $52.59 a barrel.

The bill failed to make it out of Committee. So there will be no changes in the Oil and Gas Tax Holiday before at least 2017, and there is no reason to think that this Montana holiday will be any different from the permanent tax breaks enacted 100 years ago in Washington.

Direct subsidies
Beyond these tax breaks, oil projects in different states often get direct subsidies for their operations from politicians who receive political contributions from the companies that get the subsidies. Some examples:

  • A proposed Shell refinery in Pennsylvania is in line for $1.6 billion in state subsidy, according to a deal struck in 2012 when the company made an annual profit of $26.8 billion.

The deal was struck by the then-governor Tom Corbett, who received over $1 million in campaign donations from the oil and gas industry. Shell has also spent $1.2 million on lobbying in Pennsylvania since 2011.

  • ExxonMobil’s upgrades to its Baton Rouge refinery in Louisiana are benefiting from $119 million in state subsidy, with the support starting in 2011, when the company made a $41 billion profit.

The deal is championed by Governor Bobby Jindal, who has received 231 contributions from oil and gas companies and executives totalling $1 million over the last decade.

  • A jobs subsidy plan worth $78 million to Marathon Petroleum in Ohio began in 2011, when the company made $2.4 billion in profit.

In 2011 Governor John Kasich was the leading recipient of oil and gas contributions in Ohio, at over $200,000. The same year Kasich appointed Marathon Petroleum’s CEO to the board of Jobs Ohio, a semi-private group “in charge of the economic growth in the state of Ohio”.

Source: Mother Jones

Source: Mother Jones

It all comes back to the money
With the passage of Citizens United, the amount of political giving by the oil and gas industry has exploded, as indicated in the chart from Mother Jones at right. We can only expect more of these play-for-pay oil subsidies in the future.

It won’t surprise you to know that the oil and gas industry is one of the leading contributors to political office holders. and it won’t surprise you at all to note that, according to OpenSecrets.org, of the 435 members of the House, our own (now-Senator) Steve Daines ranked sixth in oil and gas contributions in the 2014 election cycle:

Oil and gas political contributionsAnd finally, while this isn’t a political blog, I’d be remiss if I didn’t mention that 90% of oil and gas industry contributions go to Republican candidates.

In the end, it’s all pretty simple. The government unnecessarily pays the richest companies in the nation to make huge profits pulling fossil fuels out of the ground, and refuses to regulate those companies in a way that protects landowner rights and safety.

It’s a sorry state of affairs.

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Checking in on the price of gas, oil, and declining rig counts

While the price of oil has begun to climb from its precipitous crash at the beginning of this year, the drastic impact on oil drilling activity in Montana and North Dakota has leveled off, but has not recovered.

Oil price_051015The last time we looked at the price of oil in January, it had crashed to $48.59, a drop of nearly 60% over six months. The price has recovered slightly to $59.14 as of May 10, which is still over 40% lower than it was last June. You can click the graph at left to see the detail.

Gas price_Columbus_051015The local price of gas has followed the price of oil. After a dramatic decline at the end of 2014, gas prices have risen somewhat. The lowest price in the region as of May 10 is $2.26 at the Town Pump in Columbus, up from a low of $2.03 in January, but still much lower than the price of $2.97 in November.

No recovery in oil rig counts
But what has not recovered is oil drilling activity in the Bakken. As we explained last January, there are two components of cost in producing oil from a well: the fixed cost of finding the oil, drilling, and generating the initial output, and then the variable cost of keeping the well going over time. Fixed costs include primarily equipment costs and labor, and variable costs are mostly labor and electricity.

oil-rigWhen an operator is making a decision in advance about whether to drill a well or not, he looks at the total of both fixed and variable costs to determine whether it is going to be profitable to drill the well. Profit over time is the difference between expected revenues and the total of fixed and variable costs.

But once the decision is made to drill a well and the well starts producing, the fixed cost is spent. From that point on, the decision about whether to keep operating the well is based on whether the revenues are greater than the variable cost of production.

Oil rig count 050815While oil prices have been high enough to cover the variable cost and allow many existing wells to continue operation, there have been few new wells dug. Nationally, the oil price bust has had a tremendous negative impact on the number of oil rigs in operation. As you can see by clicking on the graph at left, the number of operating rigs has been cut in half since January.

The decline has been even greater in the Bakken. According to the Dickinson Press, North Dakota had 80 active drilling rigs as of last Friday, about 60% fewer than a year ago, when the state had 174 active drilling rigs. That number was one greater than the week before, the first weekly increase in 2015.

Don’t expect a significant increase in the number of rigs until the price reaches $80 or so. And along the Beartooth Front, the price will have to rise even higher before ECA and other operators return.

Locally, landowners trying to manage the impact of the boom-and-bust oil industry on their communities remain hard at work. They seek to regulate oil and gas drilling locally to protect not only their land and water, but the generations-old way of life in their communities.

They understand that following the cycles of boom and bust is a fool’s errand.

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Don’t miss this educational event: Property Rights Forum, Absarokee, May 14

I want to make you aware of what promises to be an outstanding educational event, to be held at the Anipro Event Center in Absarokee on Thursday, May 14 from 9:00am – 4:00pm.

It’s a Property Rights Forum, dealing with issues related to land and mineral development, with commentary from professionals and experts in a variety of fields. The panel is an amazing collection of experts — many of them have been featured on this site because of their expertise.

The event is sponsored by the Stillwater Valley Watershed Council, the Beartooth Stock Association, the Stillwater Protective Association, and Montana State University Extension.

The cost is $15 if you are a member of any of the sponsoring organizations; $20 for non-members.

svwxThe panelists, and their connections to issues addressed on this site:

Adam Sigler

Adam Sigler

Adam Sigler is the Extension Water Quality Associate Specialist in the Land Resources and Environmental Sciences Department at MSU Bozeman. He has been conducting water quality research, education, and outreach with MSU Extension since 2005. Adam is the Montana coordinator for the National Institute of Food and Agriculture (NIFA) National Water Program, teaches a junior level water quality course at MSU, works with watershed groups and tribes around Montana to build water quality monitoring capacity, collaborates with the National Park Service’s Greater Yellowstone Inventory and Monitoring team on water quality monitoring and conducts educational programming for private well and septic owners in Montana. He has delivered two well-attended water seminars for landowners concerned about oil and gas development that have been covered on the site.

Hertha Lund

Hertha Lund

Hertha Lund is the founder and owner of Lund Law in Bozeman. She is a Montana native, growing up on ranches around Browning and Lewistown. Hertha covered policy issues in Washington, D.C. for the American Farm Bureau Federation before coming back to Montana for law school. While in law school, Hertha was the co-Editor in Chief of the Montana Law Review. After law school, Hertha clerked for the Honorable Loren Smith of the U.S. Court of Federal Claims. She is a frequent lecturer on property rights, water rights, and teaches eminent domain continuing legal education courses to other Montana attorneys. She has been representing landowner interest in the state for two decades, including the Belfry landowners who submitted a citizen-initiated zoning petition in Carbon County.

Craig Drake

Craig Drake

Craig Drake is Assistant Field Manager with the Bureau of Land Management. He was extremely helpful and informative regarding potential oil leasing of BLM land in the Dean area last year. Partly based on his information, an outpouring of public support caused these leases to be deferred last year.

Breeann Johnson

Breeann Johnson

Breeann Johnson is an Associate attorney with Lund Law. Ms. Johnson’s areas of practice include water rights, land, agriculture, oil and gas, and Indian law. She has significant contract, lease, and easement drafting experience in a wide range of areas including commercial and private-party contracts, oil and gas leasing, agricultural, residential and commercial leases, as well as road and utility easements. She routinely practices before the Montana Water Court on a number of water rights adjudication matters.

 Dick Iverson, Rancher, Culbertson (Bakken area)

Meeting Agenda
9:00 –  9:15:   Introduction of forum and presenters (Moderator, Lee Schmelzer)
9:15 – 10:15:  Baseline Information on Oil/Gas Exploration from Around the State,      Adam Sigler
10:15 – 10:30:  Break
10:30 – 11:30:  Surface Rights vs. Mineral Rights-What Landowners Need to Know, Breeann Johnson
11:30 – 12:30: Federal Leasing and the Development Process, Craig Drake
12:30 – 1:15:    Lunch
1:15 – 2:15:      Pros & Cons of Oil Development and Introduction of the White Paper “Fracking: What Are the Questions?”, Hertha Lund
2:15 – 3:15: Secondary Effects, Dick Iverson, Cattle Rancher, Culbertson, MT
3:15 – 4:00: Questions/Closing Remarks

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New study: drilling causes water contamination in Pennsylvania wells

An analysis of drinking water sampled from three homes in Bradford County, Pennsylvania revealed traces of a compound commonly found in Marcellus Shale drilling fluids, according to a study published on Monday.

“This is the first documented and published demonstration of toxic compounds escaping from uncased boreholes in shale gas wells and moving long distances” into drinking water, said Susan Brantley, one of the study’s authors.

The study, published in the Proceedings of the National Academy of Sciences, found traces of the chemical compound 2-BE in the wells. The compound is often found in drilling and fracking fluid, as well as paint, cosmetics and fluids, but the authors identified drilling as the most probably source. According to the study, the contaminants “migrated laterally through kilometers of rock at shallow to intermediate depths” to reach the wells.

A well in Bradford County, PA. Photo: Reuters

A well in Bradford County, PA. Photo: Reuters

Wellbores the source of contamination
We should be clear about the source of contamination in the study. The oil and gas industry can hold on to its big lie about fracking and water contamination. That’s the one that says that, because fracking occurs thousands of feet below drinking-water aquifers, the drilling chemicals that are injected to break up rocks and release the gas trapped there pose no risk. While the residents of Pavillion, Wyoming would disagree, the fracking process itself is not the source of contamination in this case.

What we’re talking about in this case is a lack of wellbore cement casing integrity, a common problem in oil and gas drilling. The researchers suggest that the wells, which were established in 2009, were constructed with a protective intermediate casing of steel and cement from the surface down to almost 1,000 feet. But below that depth the wells lacked the protective casing, putting them at greater risk of leaking their contents into the surrounding rock layers.

According to the researchers, it is likely that fracking fluid escaped the borehole while crews were first drilling the gas well and migrated over time through the rock subsurface to the wells.

How does Montana regulate casings and wellbore depth?
Montana has some regulations regarding cement casings, but it is unlikely they would prevent the kind of contamination described in this study. Montana does not require that drillers meet American Petroleum Institute Standards for well casings, which include:

  • Conductor casings should be cemented to the ground surface
  • Intermediate casings should extend above aquifer and hydrocarbon zone
  • Production casings should be cemented at least 500 feet above the highest formation where fracking is performed
  • Surface casings should be cemented to a pre-determined depth across all aquifers and below the deepest aquifer

Instead, Montana standards do not address these standards for conductor casings, intermediate casings, production casings or surface casings.

well casingWhat it means for us
The study released this week is important because it confirms that a lack of wellbore integrity can cause water contamination miles from a fracking site, and it demonstrates the clear risk to wellbores that are not properly regulated.

The Administrative Rules of Montana do not properly regulate the integrity of wellbores. This is critical for Montana residents to understand, and I encourage all of you to read the regulations for yourself.  You can find them in the following sections of the Administrative Rules of Montana: 36-22-1001, 36-22-1002, 36-22-1416, 36-22-1010, 36-22-1011, 36-22-1013, 36-22-1106, 36-22-703. There is a good summary of the basic provisions of these laws at Law Atlas (click on map of Montana to see summary).

The bottom line, and stop me if you’ve heard this before, is that Montana communities need to take control of the regulation of oil and gas drilling. The American Petroleum Institute has set forward standards for protecting wellbore integrity, which Montana law does not follow. It is worth noting that Pennsylvania (click on Pennsylvania map), the site of the contamination in this week’s study, has adopted the American Petroleum Institute standards subsequent to 2009, when the wells in question were established.

It’s your water. Take action to protect it.

Related: Why a car’s engine has more integrity than a shale well

Posted in Fracking Information, Health impacts | Tagged , , , , , , , | 2 Comments

Montana legislature to eastern Montana: your infrastructure, your problem

The Montana legislature has failed once again to pass a bill that would support the increased infrastructure needs caused by oil and gas drilling in eastern Montana. As the semi-annual legislative session closed this week, two bills that would have provided $150 million in infrastructure relief died ignominious deaths.

It was the second consecutive session in which the state failed to provide infrastructure relief to towns like Sidney, Glendive and Culbertson. In 2013, Governor Bullock vetoed a similar bill.

Now there’s no chance of state help until the legislature meets again in 2017.

More drilling means higher infrastructure cost
When oil and gas drilling expands, infrastructure needs increase. More traffic means more road maintenance. More workers means more kids in school. A higher population means a greater need for health care. Man camps full of workers with big paychecks means more crime, and overcrowded jails and court systems.

In a perfect world, more drilling should mean more revenue to the state coffers, which could in turn be shared with local governments to pay for the increased costs. But Montana, as you’ve learned, isn’t perfect. The state has decided to give operators an Oil and Gas Tax holiday to stimulate production, and legislators are determined not to change that. The operators get to keep their profits and local taxpayers pay. And pay. And pay.

Rural Road comparisonThis has been going on for years with no state help
This is not a new phenomenon in Montana. In 2012, Bret Smelser, then-mayor of Sidney, said this to the Montana Policy Review:

We are overwhelmed with increases in garbage collections and overwhelmed with police having to respond to more incidents. Our volunteer fire department is stretched: as an example, the other day they responded to three fires before noon. This is a volunteer fire department. Infrastructure, manpower, and the increases we’re seeing in water, sewer, garbage collection–those are the major challenges.

Sidney raised water rates, raised sewer rate, raised sewer hookup fees, and initiated impact fees, but it wasn’t enough.

Central Avenue in Sidney is inundated with truck traffic.

Central Avenue in Sidney is inundated with truck traffic.

Then in 2014 the oil price bust provided Sidney with a new infrastructure hit. According to new Mayor Rick Norby, the town will receive $600,000 less in tax revenue from oil production in 2015, plus a hit in hotel and gambling taxes. As a Montana Public Radio report put it, “That’s a big deal when your whole budget is $11 million and your town now has a major highway running through it.”

Crime is up and Norby doesn’t have the police force to deal with it. The town’s population has grown 20% since 2010, and the police force has grown the same amount. But arrests for DUI, assault, narcotics and disorderly conduct have increased as much as 475% in the same period.

The schools need to grow, but a long-term development plan doesn’t have the funding necessary to build new buildings.

And now, once again, the legislature won’t be providing desperately-needed funding. The Senate failed to pass SB374, which would have provided more Oil and Gas Tax revenues.

What it means for the Beartooth Front
This is a cautionary tale for communities along the Beartooth Front. The boom cycle can be ruinous to a town. Sidney is still booming, but the oil price collapse could be a precursor of a complete bust.

The boom was something that happened to Sidney. Growth occurred outside any ability of the town to control it.

Communities concerned about their long-term futures need to plan and take local control of growth. This is why residents of Carbon and Stillwater Counties are fighting to have oil drilling on their own terms.

Related: Other posts on this site about infrastructure; what residents along the Beartooth Front want

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Beware: The oil and gas industry has a national game plan to limit local regulation of drilling

Oklahoma has a problem with man-made earthquakes caused by injection wells associated with fracking. You’ve read it on this site many times, most recently on Monday of this week, and Oklahoma’s elected leaders have publicly admitted this is true.

So you would naturally think that state lawmakers would support efforts by landowners to protect their property, and enable them to create regulation that would reduce the possiblity of earthquakes, and protect water, air and soil.

Inspecting the damage from an induced earthquake in Shawnee, Oklahoma. Photo: Associated Press

Inspecting the damage from an induced earthquake in Oklahoma. Photo: Sue Ogroki, Associated Press

You might think that, but you’d be substantially underestimating the power of the oil and gas industry.

Instead of protecting property owners, the Oklahoma state legislature is proceeding full speed ahead to protect the companies causing the earthquakes. They’re doing this by limiting the ability of localities to make rules about oil and gas drilling in their towns.

At least eight bills were filed in Oklahoma in the current legislative session to prevent cities and counties from regulating drilling operations. Two of these passed in the Oklahoma House last week: SB 809 and SB 468.

Representative Jeff Hickman, sponsor of Oklahoma SB809

Jeff Hickman, Speaker of the Oklahoma House of Representives, is the sponsor of Oklahoma SB809

SB809 would prohibit direct regulation of oil and gas exploration, drilling or fracking, but would allow “reasonable” ordinances related to “road use, traffic, noise and odor.” SB 468 is worse — it would fix it so that any interference in oil and gas production by local government would be considered a “taking” of property, meaning mineral rights holders could seek compensation.

The oil and gas industry playbook
For those of us trying to protect our property and way of life from unregulated and irresponsible drilling, this should set off huge alarm bells. Last week we read that the Texas legislature is in the process of passing similar bills to block local regulation of drilling. And the phrase “taking of property” should throw outright panic into those of us along the Beartooth Front.

When Energy Corporation of America attorney Mike Dockery argued against the establishment of a citizen-initiated zone in Carbon County, he made this exact same “taking” argument. His argument went that the Montana Board of Oil and Gas Conservation (BOGC) has the exclusive right to regulate oil and gas drilling, that the BOGC had already issued a permit for a well in Belfry, thus providing ECA with a “constitutionally-protected right to develop the well as defined by the permit.  Thus, further regulating the way in oil is recovered would be a “taking” of property. (Read Dockery’s full letter here.)

It doesn’t take a mathematician to add two and two. What’s going on here is that the oil and gas industry, stung by recent bans in places like New York and Denton, Texas, has gotten together to develop a playbook on how to beat local regulation of drilling. And everybody’s on the same page. They’re passing the same laws in state legislatures. They’re using the same legal arguments to fight local regulation in courts, and, let’s not forget, they’re doing everything they can to politicize state judicial systems and bring in political judges who will side with the oil and gas industry.

Now is the time for action
We are just finishing our semi-annual legislative session in Montana. We have two years until the next one. You can guarantee that the oil and gas industry will have their playbook in place for the next session in Helena.

This means that we need to be putting local regulations in place, and developing them in such a way that they will withstand pressure to override them. Local communities need to be in action to get these regulations passed and into effect NOW.

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US Geological Survey documents earthquakes caused by injection wells, and a new map of the Yellowstone caldera

A United States Geological Survey (USGS) document released last week documents an increase in earthquakes likely caused by human activity, mapping 17 seismically active pockets in eight states.

The USGS map:

17 areas identified by USGS as having increased rates of man made earthquakes, particulary since 2009. Source: USGS

17 areas identified by USGS as having increased rates of man made earthquakes, particulary since 2009. Source: USGS

While the document does not state the causes of the quakes, it points out that there has been a “substantial increase” in quake rates since 2009, and that the increase is attributed by other studies to the “injection of wastewater or other fluids in deep disposal wells.”

We have covered this topic often. There is now ample evidence that proves that injection wells associated with fracking cause these quakes, particularly in Oklahoma, the center of the map above.

The rise in these earthquakes since 2009 directly coincides with the fracking boom in these areas:

Cumulative number of earthquakes with a magnitude of 3.0 or larger in the central and eastern United States, 1973-2014. The rate of earthquakes began to increase coinciding with the fracking boom in 2009

Cumulative number of earthquakes with a magnitude of 3.0 or larger in the central and eastern United States, 1973-2014. The rate of earthquakes began to increase coinciding with the fracking boom in 2009

“This new report describes for the first time how injection-induced earthquakes can be incorporated into U.S. seismic hazard maps,” said Mark Petersen, Chief of the USGS National Seismic Hazard Modeling Project. “These earthquakes are occurring at a higher rate than ever before and pose a much greater risk to people living nearby.”

After years of officially ignoring the link between fracking and earthquakes, the state’s science and energy cabinet admitted last week that “it (is) very likely that the majority of recent earthquakes, particularly those in central and north-central Oklahoma, are triggered by the injection of produced water in disposal wells.”

What does it mean for the Yellowstone caldera?
While Montana and North Dakota have not seen this same level of induced earthquakes, the juxtaposition of the USGS report with a new report, also issued last week, by a team of University of Utah scientists on seismicity in the Yellowstone volcanic system offers a reminder that what we don’t know about earthquakes and fracking should scare us.

The richly-colored Yellowstone Grand Prismatic Hot Spring was caused by the Yellowstone caldera. Photo: Robert Smith and Lee Siegel

The richly-colored Yellowstone Grand Prismatic Hot Spring was caused by the Yellowstone caldera. Photo: Robert Smith and Lee Siegel.

The report describes for the first time a large reservoir of hot rock, mostly solid but with some melted rock in the mix, that lies beneath a shallow, already-documented magma chamber.  The newly discovered reservoir is 4.5 times larger than the chamber above it. There’s enough magma there to fill the Grand Canyon. The reservoir is on top of a long plume of magma that emerges from deep within the Earth’s mantle.

While the report doesn’t change the timetable for a future major eruption, it is a reminder that we act at great risk if we jostle the earth’s crust. The report indicates that the next earthquake in the region could occur within the boundaries of Yellowstone Park, just 60 miles away from drilling activity in Stillwater and Carbon County.

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