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Experts Caution Against 'One Size Fits All' Shale Regulation

Natural gas experts say they believe the Marcellus Shale play can be developed in a way that benefits both industry and area residents, but they voiced concern about possible federal regulation of hydraulic fracturing (fracking) that they said could be based on situations unique to Marcellus.

Speaking at the Energy Information Administration Energy Conference on Wednesday in Washington, DC, John Steelman of the Natural Resources Defense Council said fracking into the Marcellus Shale, especially in Pennsylvania, was made more complicated because it is also home to the oldest abandoned oil wells in the nation.

"The water table is vulnerable because there are a lot of pathways that have been there for a hundred years," Steelman said. "We would propose that if you can't dispose of the wastewater that comes up with these operations, then that would be an area where you don't do that kind of fracturing."

Steelman called the potential for shale gas "enormous" and cited the price for natural gas, which he said was about $12/Mcf back in the early 2000s but about $4/Mcf today.

"Is there any reason why we need to be rushing to develop this resource?" Steelman asked. "Why can't we slow down, take the precautions that are needed and do it right? These communities and states need to revisit their laws and make sure that they are aligned with the [appropriate] types of exploration and development."

James Sorenson of the University of North Dakota agreed that the situation in Pennsylvania differed from North Dakota because of history and geology. But he said he was worried about the prospect of federal regulations blanketing both states.

"My big concern is that those [federal] regulations are going to become prescriptive," Sorenson said. "The [solutions to] problems we see in the East are going to be applied to the West, much to the detriment of places like North Dakota, where we have regulations in place. We have robust policies and have done our due diligence."

Porter Bennett, CEO of Bentek Energy LLC, agreed.

"One of the real dangers is taking problems that involve one place and assuming you have that same problem elsewhere," Bennett said. "All of the states regulating the production of natural gas and oil do it very effectively, but they do it based on the idiosyncrasies of the formations and operations in those states.

"Some of the debate out there now is saying the federal government ought to take this over. There is a propensity to have 'one size fits all' kinds of solutions, and that's not a good thing. It will end up costing consumers a lot of money and diminish some of the capabilities the industry has to produce this bountiful resource."

Opining on the future of the shale gas industry, Bennett said the market continued to evolve but predicted that companies with reserve holdings in places like the Marcellus and Eagle Ford would fare "quite well in a low-price environment," and predicted that there would be some consolidation.

"The companies that don't have [reserve holdings] will have to drill more conventional wells, which are more expensive and don't have the economies of scale. There will be a lot more pressure on them, and there will probably be some consolidation, with the 'have nots' being picked up by the 'haves.'"

Bennett added that there was still no question that shale posed some geological risk.

"There is some real question [among academics] as to why shale even works; the mechanisms are not well understood," Bennett said. "But as time has gone on, those risks are being dampened. There is a lot lower probability of shale gas fizzling out than there might have been a couple of years ago when there was a lot of skepticism. I think there is enough evidence to say that shale is going to be the 'horse' it appears to be and it will be a long ways down our energy future."

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