Exploration and production companies have heeded the call to improve transparency and institute better practices, but there’s more to do to address the concerns of stakeholders in the shale plays, a Range Resources Corp. executive said last week.

Range has been at the forefront of addressing the public’s concerns in the Marcellus Shale, where 80% of its capital spending is directed. Many of the company’s efforts have now become standard industry practice. Senior Vice President Ray N. Walker Jr., who directs the environment, safety and regulatory compliance division, and is chairman of the Marcellus Shale Coalition (MSC), spoke with NGI’s Shale Daily on Thursdayin a wide-ranging interview about what the shale industry has done right and what it still needs to do to ensure success going forward.

Walker also offered some insight into Range’s long-term plans as CEO John Pinkerton steps down.

“We kind of take a different tack than we used to as an industry because of a few things that have happened in the last couple of years and the great proliferation of a thing happening called shale gas,” Walker said. “The things that people are hearing about are new and oftentimes, a little bit scary.

“So we have taken the lead in a lot of aspects to get to the bottom line. And I think we are moving the needle through outreach and transparency. Clearly, we have to address people’s concerns” when it comes to hydraulic fracturing (fracking) and water sourcing. “We have, as an industry, a lot of answers. And we have done this a lot, developed a lot of new technology. We have a real quandary. How do we connect the answers with the concerns in such a way that this diverse group in the public and the stakeholders will believe it? I think a lot of that is education, talking to people, being transparent.”

For example, “in July 2010 Range was the first company in the industry, across the world, to publicly disclose all of the chemicals used in fracking jobs on a well-by-well basis [see Daily GPI, Aug. 13, 2010]. It’s out there, you can find it on the website. As a result of that move, and it was a big move by a company the size of Range, today we’ve got industry-wide efforts like Fracfocus.org and a lot of national efforts to get more transparent about what we are putting into these completions. We’re real proud of that. It’s a good example of being transparent.”

The industry as a whole also has “picked up the ball in best practices,” said Walker. “We have to do things better. We can no longer be a compliant industry. We have to be better than that. We used to think, like a lot of industries, that regulators will tell us the rules and we’ll play by the rules. Now we have to do more than that. We have to do more engineering, take more safety steps, develop new technology.”

In fall 2009 Range began to recycle its drilling flowback water. “That was a technology that we worked on hard and we worked on how to make it work. We shared it publicly with the rest of industry [see Shale Daily, Aug. 24]. And today, at least in the Marcellus, most operations are striving to get to 100% recycling of water sourcing, which is at the heart of a lot of concerns. But it also helps us to save money. It’s those kinds of things, which are good examples of developing something and then being transparent with the public, that are going to move the needle.”

Walker said “the folks in Pennsylvania, the regulatory agencies, the administration and legislature, everybody is starting to appreciate the fact that it can be done correctly. Organizations like the MSC have made tremendous progress in publicizing that, educating all members on what are the best techniques to construct water protection casing streams. There is sharing amongst all operators. Everybody’s got the wherewithal to do that. Does that mean we’ll never make a mistake? Of course not. It’s an industrial activity. But we’re trying to do the right thing and we’re getting better and better at it.”

Asked about research by some oilfield services companies into fracking techniques without using water, the former Halliburton Co. executive was skeptical.

“A lot of research projects are going on to look at different ways to accomplish this without using water. That’s the sort of utopia that we’re all striving to get to. As a guy that’s been intricately involved in the effort for way over 30 years, it’s hard to envision how they will get there. But it’s a worthwhile effort that I applaud and encourage…but it’s way, way off in the future.

“People in Pennsylvania aren’t worried about sourcing water anymore. We are beginning to do a better job about educating about water. And because we are recycling, we’re not using as much anymore. The concern was over the disposal of water and since we’ve been recycling, it’s alleviated those concerns. We’ve spent a lot of time working on designs of containers and structures for handling and storing…and are working on pipelines to move flowback water around. A lot of work is going on. I don’t think water will be as big an issue going forward with the efforts we are putting forth.”

But there always will be the protesters, will there not?

“A lot of times, I believe it’s true, that when you look at the population in general, on the bell curve, you have people out there on the fringes, with 5% on either end of the argument. For some people it used to being NIMBY [not in my backyard] but now they are becoming BANANA — build absolutely nothing anywhere near anything,” he said.

“Then there are people on the other end of the argument that want to be able to do whatever they want. Neither one is right. What we can say, as a company, we sure do a lot of work in the [Marcellus Shale] coalition, and we have talked to 20-25 conservation and NGO-type [nonprofit governmental organizations] groups. Ninety percent of them agree on 90% of what we talk about. That’s a reasonable, manageable theory. Most people are reasonable if they are given the facts and we address their concerns. We are beginning to see that they want jobs, they want the economy to improve…”

The rapid buildup of the shale plays across the country caught everyone by surprise — stakeholders and the industry, said Walker. The petroleum engineer joined Range in 2006 and was elected to his current position in February 2010. He previously was vice president of the company’s Marcellus Shale division, where he pioneered the development.

The shale phenomenon “is especially interesting to me,” he said. “I was a really young engineer in 1982, having graduated from Texas A&M University, and I had friends working at Mitchell Energy [& Development Corp.] talking about fracking Barnett Shale wells. I thought they were playing a joke on me.” George Mitchell’s company in the 1980s pioneered the technique to link horizontal drilling with fracking to produce gas. “We designed a pump in 1982 and about probably 2001 and 2002, that time frame, the Barnett lit up. Everybody then started looking for the next Barnett. Of course, we found the Marcellus in 2004. And from that point forward, it’s unbelievable…There’s not a week that goes by that some new play isn’t being talked about.”

Range, with more than one million net acres, is the second largest leaseholder in the Marcellus Shale after Chesapeake Energy Corp. There’s potential for three stacked shale formations that run from Pennsylvania into Ohio, Walker explained. The Upper Devonian formation runs above the Marcellus, while the Utica Shale runs below it (see Shale Daily, March 7). Range now is testing the formations with expanded work in the Upper Devonian and Utica planned in the next year.

Without the Utica, Range has an estimated 56 Tcfe in net unproven reserves, said Walker. The company has an estimated 22-32 Tcfe of net unproven resource in the Marcellus, while in the Upper Devonian it has 8-12 Tcfe of net unproven reserves. Outside the Northeast, Range also holds 5-6 Tcf of proven reserves in the Midcontinent, the Permian Basin and the Nora formation in Virginia; it also has an estimated 8-10 Tcfe of net unproven reserves. In addition, there’s a “big liquids upside” to the leaseholds.

“We just haven’t had any time to get around to everything that we’ve got,” he said. Range doesn’t have to hurry — the company’s drilling rights for the Utica and the Upper Devonian are secured because they are held by production by drilling Marcellus wells.

Rumors circulated last month that Range was being pursued by Royal Dutch Shell plc, and the companies have offered no comment. However, Walker was asked if Range would consider partnering or creating a joint venture with a deep pocket company on some of its shale acreage, as have some of its peers.

“We have internally what we call a long-range plan,” he said. “That’s nothing new. Every company has one. It’s a model built from the ground up on which we run a countless number of iterations on how to best grow value for our shareholders. We look at all kinds of ways to get there. And we have for years been working really hard to build up our resource potential.

“We’ve got the ability to grow our company 10-15 times with what we believe to be world class economics in what we believe to be the best rock in the world in a prime market in gas or liquids. And we’ve got a huge inventory that can provide substantial and significant production growth for years to come organically.”

But “unless someone can show us a better way to grow value for our shareholders, we’ll stick to the path we’ve been on,” he said. “We’ve cleaned up our balance sheet; we have $2 billion in liquidity…$1.5 billion in commitments from a diverse group of lenders. We’ve eliminated the risks there. We have major takeaway sales, ethane contracts…And it’s not to pat ourselves on the back, but we’re a well oiled machine. We think we have a really strong plan in place. I don’t see any other options as being anything that would create any more value than we have in the works.

“That being said, if someone walks in with a viable offer, we have a fiduciary responsibility to our shareholders to look at that.”

Long-time leader Pinkerton will be retiring at the end of the year (see Shale Daily, June 28). Will Range change its strategy when COO Jeff Ventura takes the helm?

“Absolutely not,” Walker said. “We have a very team-oriented CEO. All of us on the senior management team have provided a lot of input and we’ve been working together the last four or five years. It’s a team effort. [Pinkerton] has been the leader and he’s responsible for pushing us when we needed to be pushed, certainly. But nothing is going to change.”