Appalachia

Stone Energy is an active operator in the Marcellus Shale, a Devonian-age black shale formation that was deposited throughout the Appalachian Basin from southern New York throughout central and western Pennsylvania and West Virginia and into eastern Ohio and Kentucky (map 1).  Although the Marcellus Shale outcrops at the surface in certain areas, the depth of the most productive Marcellus Shale reservoirs ranges from about 5200 feet below the earth’s surface down to about 8000 feet below the earth’s surface.  A core area of the Marcellus Shale having sufficient thickness and pressure to contain significant concentrations of natural gas covers approximately 20 million acres.

The Marcellus Shale has been a known source rock for natural gas for many years, but it was not until recent advancements in horizontal drilling has the play become economically viable as a reservoir rock.  Using horizontal drilling and slickwater hydraulic fracturing techniques, the Marcellus Shale has now become one of the largest natural gas fields in the world.  Current industry practices take great care to ensure protection of fresh water aquifers through the use of multiple protective strings of steel casing that are cemented back to the surface between the outside of the casing and the walls of the rock penetrated by the well.  In an effort to achieve operational efficiency and minimize areas of surface disturbance, Stone Energy drills six or more horizontal wells from a single drilling pad, thereby reducing the number of pad sites, access roads and pipelines required to develop these natural resources.

Gas-in-Place estimates vary widely, but the U.S. Energy Information Administration (EIA) estimates the United States to possess more than 2,500 trillion cubic feet of technically recoverable natural gas resources, of which 33 percent is held in various shale formations.  About 400 trillion cubic feet of this total is estimated to come from the Marcellus Shale.  Natural gas from shales has grown to over 20 percent of U.S. gas production from virtually nothing in just the last ten years and is predicted to be 50 percent of U.S. gas production within the next twenty years.  At current U.S. consumption rates of 27 TCF per year, the Marcellus Shale represents a resource that can contribute greatly to meeting the country’s energy needs for many years to come.

Developing these natural gas resources will enhance the country’s energy security, strengthen local and state economies and fuel job growth.  In 2010, the development of the Marcellus Shale in Pennsylvania alone generated $1.1 billion in state and local tax revenues and supported nearly 140,000 jobs.  The predicted growth of this natural resource likely means we also can expect to see similar economic benefits over the coming years in each of the states in which such shale development will take place.  Other shale formations are also becoming the target of exploration and development in the Appalachian region, including the deeper Utica Shale formation. 

As of January 2014, Stone Energy owns approximately 90,000 acres of Marcellus Shale leasehold rights in West Virginia and Pennsylvania and is actively looking to expand its operations in this play.  Stone’s headquarters for its Appalachian operations are located in Morgantown, West Virginia with a field office located in New Martinsville, West Virginia.  We currently employ approximately 30 full-time employees and over 200 additional consultants or contractors to perform our construction, drilling, completions and production operations.  The vast majority of these workers are from Appalachia, many of whom have moved back to the area after having gained industry experience in other parts of the country. 


Fracking & Operations

Hydraulic fracturing, also known as “fracking” or fracturing, is an industry-wide practice that has received significant attention and increased scrutiny from the media and environmental community in recent years.  Fracturing involves the injection of water, sand and chemicals under pressure into prospective rock formations to stimulate oil and natural gas production.  The rise in unconventional natural gas and oil production is largely attributable to successful fracturing.
 
The fracturing technique has been safely used in the United States by the oil and gas industry for over sixty years in more than one million wells.  In fact, according to the Interstate Oil & Gas Compact Commission (IOGCC), hydraulic fracturing has been used to complete over 90% of the oil and gas wells drilled in the United States.  We use this completion technique on all of our wells drilled in the Marcellus shale.

We believe the environmental risk associated with fracturing is very low, yet it is important for us to effectively manage this risk.  Therefore, we utilize numerous best practices relating to well construction, water management and chemical selection to effectively mitigate these risks and reduce the overall environmental impact from fracturing.  Studies conducted by several environmental authorities including the EPA, the Ground Water Protection Council and The Interstate Oil and Gas Compact Commission have concluded that hydraulic fracturing is safe and does not pose a threat to human health and poses little to no risk of contamination to underground drinking water sources. 

                                                         

Pre-Drilling
We are focused on safety from the beginning of the life of a well.  Long before we begin drilling, our geologists perform a geological assessment of the site to identify faults, mines and wells in the area and to assess the overall geological soundness of our drilling location.  Our geologists and engineers weigh all available facts and attempt to choose a location, when feasible, where we can drill multiple laterals off of one pad in order to minimize any surface impact to the surrounding environment.

Once well locations are identified, we generally meet with the surface owners to discuss the placement of well sites and, preferably, to enter into agreements with the surface owners to compensate them for foreseeable damages and to provide individualized guidelines on our surface use.   We actively participate in public forums, community programs and at times have sponsored our own town meetings to answer community questions, address concerns and generally educate the public about oil and gas operations.     
 
To the extent possible, we also collect and analyze water samples from a radius of at least 2,200 feet around a well location to determine if contaminants are present prior to our commencing any activities on the land.  West Virginia requires a 1,500’ search radius while Pennsylvania requires a radius of 1,000’.  Stone Energy applies the larger 2,200’ search radius for every well we drill in either state.  Individual landowners will occasionally not permit the collection of water samples.   All landowners are provided the water test results.

Drilling The Well
The Marcellus shale from which we produce gas and associated condensate is separated from groundwater by thousands of feet of impermeable rock. Fracking of the well takes place at a substantial distance below any drinking water aquifers.  Nevertheless, as an additional precaution, we take great efforts to protect the environment and drinking water supplies from all aspects of our operations, including fracking.  Each of our wells is designed to protect groundwater for the life of the well. 

Casing and cementing practices are a critical part of the well construction process to not only effectively protect shallow water zones but to also ensure integrity of the producing zones.  Industry standards and state law requirements ensure multiple levels of protection between drinking water sources and the production zone of a well.  We meet or exceed these standards and requirements in the drilling and completion of our wells.
In order to soundly construct our wellbores and to protect freshwater from the production stream, we:

  • Utilize the following general well design: (1) surface casing which is set through fresh/potable groundwater zones, (2) intermediate casing which is set through brackish/salt water zones and (3) production casing with is set through the productive zones
  • Ensure all casings are new pipe and appropriately centralized in the hole
  • Ensure sufficient time is spent waiting on cement (WOC), so that the cement develops compressive strength
  • Design surface and intermediate casing cement jobs with adequate excess to ensure cement is circulated to surface
  • Design production casing cement jobs to ensure cement is placed inside the intermediate casing
  • Utilize a closed loop drilling system and dispose of drill cuttings and wastes only in licensed landfills and disposal facilities

After drilling is finished and before hydraulic fracturing begins, we:

  • Pressure test the wellbore to ensure integrity of the casing, cement and wellhead
  • Run an acoustic cement evaluation log on the production casing to verify the cement top and cement integrity
  • Install a pressure relief system to safeguard the wellbore and to provide immediate notification in the event of a pressure leak

Fracturing Fluids - Mostly Water and Sand
The additives that we use in our fracturing fluids are provided by the vendor responsible for the fracturing services on a particular well.  We partner with vendors who are committed to providing advancements in technology, through extensive research and development efforts, aimed at reducing any potential environmental impact.  We have modified our additive selection over time as more environmentally friendly products become available and will continue to do so in the future.

Our fracturing fluids are comprised of approximately 99.5% water and sand and 0.5% additives.  We use non-potable water sources and construct plastic - lined fresh water impoundments for water storage, which also have the benefit of collecting rainwater.  All fracturing source water withdrawal points are strictly governed by the states in which we operate in Appalachia.  We comply with all regulations concerning the location and amount of withdrawals to ensure adequate protection for all wetland and aquatic ecosystems that depend on these water resources.

Most of the additives used can be found in everyday household products such as laundry detergents, cleaners, food and beauty products.  Even though additives represent such a small portion of the overall fluid, they serve several important purposes:

  • They help to eliminate bacterial growth in the well (similar to the way that chlorine helps to eliminate bacterial growth in a pool or our drinking water), since bacteria can cause corrosion, which, unless treated by chemicals in the fracturing fluid, could impact the safety and integrity of the well. 
  • They enhance the safety and integrity of the well.
  • They reduce friction to help manage well pressure.

The Ground Water Protection Council (GWPC) and IOGCC have implemented a voluntary chemical disclosure website, www.FracFocus.org, where oil and gas exploration and production companies can disclose the additives used in the fracturing process on a well-by-well basis.

We fully support the public disclosure of fracturing fluid additives and are one of the participating companies on www.FracFocus.org.  In addition, we submit information on these additives to the necessary regulatory agencies.  We also obtain Material Safety Data Sheets for every chemical we use in the fracturing fluid.  These MSDS sheets are available online to the public from independent sources, such as www.msdsonline.com

Recycling & Disposal of Fracturing Fluids
After a well has been fractured, most of the sand introduced while fracturing remains underground and holds open the fissures in the rock formation so that the oil and gas can flow and be produced.  Some of the water and additives that comprise the fracturing fluid eventually flow back up through the well.

All recovered flowback fluids are stored in steel tanks, which sit on secondary containment to prevent any of this fluid from reaching the ground in the event of a leak.

When possible, we recycle the flowback fluids and use them again in other fracturing operations.  This reduces our fresh water consumption.  Where it is not possible to recycle the fluids, we dispose of them underground into permitted injection wells that are drilled and maintained in accordance with the Environmental Protection Agency’s Underground Injection Control regulations or dispose of them at other permitted facilities that are approved to accept such fluids.

Air Emissions
Stone Energy utilizes zero-vent tanks, virtually eliminating the emission of natural gas to the atmosphere, during the completion and flowback process.  Any gas encountered is immediately flared, ensuring a safe and environmentally friendly workplace.  Improved efficiencies in facility design and installation have also enabled Stone Energy personnel to turn wells promptly into the sales line after completion activities, further reducing greenhouse gas (“GHG”) emissions from the well site.   

Furthermore, gathering systems have been designed and commissioned to transport fresh and produced water and condensate through a system of pipelines to reduce emissions from truck transportation and to improve public safety by reducing the number of trucks traveling on public roadways.

Our emissions are disclosed annually via the EPA’s Greenhouse Gas Emissions website.

End of the Life of the Well
Approximately one year after the last well from the pad starts producing, the well site is reclaimed and the size of the disturbed land necessary to produce the well is significantly reduced.

After the well has ceased producing, we plug the well in accordance with local regulations and restore the land as close to the way we found it as is reasonably prudent.  

Contractor Safety
Stone Energy’s operations are handled by trained personnel followed by routine on-site safety reviews to ensure compliance with company, state & federal regulations.  Bi-annually, a Safety Meeting is held for all current approved Stone Energy contractors to reiterate our Operating Priorities and Company Values. We have also enlisted the services of a third party contractor management system (ISNetworld) to monitor, audit & report violations of Stone Energy vendor qualifications.  

For a contractor to be considered they must be registered and be approved by ISNetworld before the process of internal approving commences in our Vendor Management System and an MSA (Master Service Agreement) is executed. The ISNetworld registration and compliance encompasses OSHA Ratings, Safety & Training, Insurance, verification of such, known as RAVS and all continuous monitoring thereafter.   Stone Energy also does random vendor review and analysis on an as required basis.

O'Brien's Response Management has been selected to train & provide compliance, prevention, preparation, response and recovery services.

Our Priority
As a Company, Stone Energy maintains a “best in class” safety performance based on industry standard metrics.  We use responsible and prudent operational practices during every phase of the well – design, drilling, completion, production maintenance and plugging and abandonment – to ensure that the fluids and commodities recovered are properly handled both in the well and on the surface.  We collaborate on and stay apprised of best practices that may reduce any potential environmental risks, including any that could arise from hydraulic fracturing.

In addition, we are committed to working with local, state and federal regulators to continue to ensure a safe environment for our landowners as well as the communities in which our employees and their families reside and work.

For more information related to the Marcellus Shale or Hydraulic Fracturing, please review the following  links:

American Petroleum Institute
American Natural Gas Association
The Marcellus Shale Coalition
FracFocus
Just Beneath the Surface
Pennsyvania Independent Oil & Gas Association

** Stone Energy Corporation does not endorse or confirm the accuracy of the information contained in third-party websites and is providing links to the above websites for informational purposes only.

625 East Kaliste Saloom Rd. Lafayette, La 70508
Phone: (337) 237-0410 Fax: (337) 521-2072
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