Fracking in Kentucky

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Fracking in Kentucky
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Regulation
Regulatory agency Kentucky Department of Natural Resources, Division of Oil and Gas
Estate ownership Split[1]
Resources
Fossil fuels present Oil, natural gas and coal[2]
Fracking
Year fracking began 1960s[3]
Other state fracking pages
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Fracking in Kentucky depends on available energy resources, the location of these resources, applicable laws and regulations, politics, and the power of environmental and industry groups. Decisions by policymakers and citizens, including state and local governments and ballot initiatives, affect if and how fracking occurs in a state.

Fracking was first used in eastern Kentucky in the 1960s. Most of the wells in the state are fracked with nitrogen gas.

Fracking background

See also: Fracking

Hydraulic fracturing, or "fracking," is the process of injecting fluid--mostly water and sand, but with additional chemicals--into the ground at a high pressure to fracture shale rocks and release the oil and natural gas inside.

Recent technological advances in oil and gas drilling--horizontal drilling and hydraulic fracturing--have created a wealth of opportunities and challenges for states with fossil fuel reserves that can be accessed through the combination of these two technologies. The increased use of fracking has been an economic boon for many states, not only those with fracking, but also those with supporting industries, such as frac sand mining or associated machinery manufacturing.

Opponents of fracking argue that the potential negative environmental and human health impacts could be significant. Although wells have been fracked for over 65 years in the United States, concerns have been raised about whether federal, state and local regulatory agencies can keep up with the recent rapid increase in fracking activity, and adequately protect the environment and human health. As with any type of energy extraction, either traditional or renewable, there are economic, environmental and political tradeoffs.

History

Oil was discovered in Kentucky in 1818 at a well drilled by a salt company searching for a brine source. Shale gas production in Kentucky began in 1892 in Floyd County. Fracking was first used in Kentucky in the 1960s in eastern Kentucky.[3][4]

Production

Most gas wells are fracked with nitrogen gas in Kentucky.[5]

In 2000, Kentucky produced 2,775,060 barrels of oil. Production peaked during the years shown in 2001 at almost 3 million barrels. Production then steadily decreased, hitting a low of 374,967 barrels in 2004. Production then increased for a few years until it reached its lowest point in 2009, with production equalling 345,298 barrels. Production has increased since this low. In 2011, the most recent year for which data are available, Kentucky produced 2,152,739 barrels of oil.[6][7][8][9]

In 2000, Kentucky produced 1,531,656 MCF of natural gas. Production generally grew until it peaked in 2003 when 86,298,112 MCF of gas were produced. Production then decreased until 2008, after which production picked up, reaching 34,966,687 MCF in 2009. That growth in production didn't continue, however. By 2011, the most recent year for which data are available, Kentucky produced 2,152,977 MCF of gas.[10]

Oil production in Kentucky, 2000-2011.png
Natural gas production in Kentucky, 2000-2011.png

Areas of activity

Map of oil and gas wells in Kentucky as of July 11, 2014

Across Kentucky there are four oil and natural gas producing formations: the Jackson Purchase, the Illinois Basin, the Cincinnati Arch and the Appalachian Basin.[11] In 2012, 60 counties in Kentucky reported oil activity, while 34 counties reported natural gas activity.[12]

The Illinois Basin crosses through the western portion of the state. There are several large oil producing formations in this basin including, Clay City, Salem-Louden Anticlines, DuQuoin Monocline and La Salle. In the Illinois Basin there are:

  • eight shale plays
  • one coalbed methane play
  • one continuous play
  • two unconventional
  • six conventional plays.[13]

Oil was discovered in the Illinois Basin in 1866 in Litchfield, Illinois. Major production from this basin began in 1905. There have been three waves of production in this basin, the first was from 1905-1910. The development of exploration techniques led to another wave from 1930-1940. The third wave occurred in 1950 with the development of fracking.[13]

The map below shows all oil and gas wells in Kentucky as of July 11, 2014. [14]

Economic impact

The use of fracking, often in combination with horizontal drilling, has made it possible to extract supplies of oil and natural gas that were once economically unfeasible to extract. This has led to significant growth in the domestic oil and gas industry, and in the supply of domestically produced oil and natural gas. The growth in activity has impacted the economy in direct ways, such as increased capital investments (from both the U.S. and other countries), royalty and lease payments, and government revenues in the form of fees and taxes. The increased supply of natural gas and oil has also affected electricity prices, manufacturing, service industries and employment. In many places, fracking has increased employment in the mining (oil and gas) sector and supporting industries, such as the restaurant and housing sectors. Consumers and manufacturers have also benefitted thus far from lower oil and natural gas prices, and increased demand for pipeline, drilling and other ancillary equipment. As demand for natural gas and oil grows, however, prices are expected to rise.[15]

Taxes, fees and revenue

Fracking booms can increase local government revenue through increases in property and sales taxes, which can help compensate for the costs detailed below. The primary revenue streams from fracking--mineral leasing revenues and severance taxes--go to state and federal governments. A study done by the Kentucky Oil and Gas Association found that in 2012 oil and gas severance taxes totaled $34,493,519. The state has collected $365,987,080.63 in severance taxes since 2002.[12]

Royalties and land sales

The United States is one of the few countries where property owners can own the right to use and build on their land, known as surface rights, but they may not own the rights to the minerals located under their property. Depending on the state the mineral rights may have been sold in the past and may now belong to someone other than the surface owner. In fact, those mineral rights may belong to more than one individual, a company, or many individuals, who now have the right to extract those minerals, and in some states this can happen without the permission of the property owner. This can cause tension between the mineral owner, or whoever is leasing the mineral rights, and property owner.[16]

In Kentucky royalty owners typically get 12.5 percent of the revenue generated by oil and gas production from a lease.[17]

Economic impact studies

Below are studies about the economic impact of the oil and natural gas industry (also categorized as the mining industry in some studies) in Kentucky. Both the author(s) and sponsor(s) of the studies have been listed.

Study for the American Petroleum Institute

Economic modeling
IMPLAN and REMI are two econometric modeling systems used in both the private and public sectors to predict economic outcomes of policy changes. While these systems are widely used and highly respected, their results are theoretical and may not be universally accepted.

Because the oil and gas industry has grown so rapidly, there is not a wealth of data regarding its economic impacts. Instead economists use forecasting models, such as IMPLAN and REMI, to predict the impact increased fossil fuel extraction is having on the economy. These studies usually measure both direct impacts, i.e., the jobs and income being added within the oil and gas industry, and indirect impacts, i.e., jobs created throughout the supply chain. These studies also include induced impact, i.e., jobs created through increased spending due to growth in the industry.[21]

The following data are taken from a study done by PricewaterhouseCoopers LLP (PwC), a research consulting firm, for the American Petroleum Institute about the economic impact of the oil and natural gas industry in 2011 in Kentucky. According to the PwC study, the oil and gas industry added $7.87 billion in total value in 2011, including direct, indirect and induced value. Of this $3.29 billion, or 1.9 percent of the state's total value added, was direct, $2.19 billion was indirect and $2.39 billion was induced, totaling 4.6 percent of the state's total value in 2011.[21]

Employment

The PwC study attributes 94,746 jobs, or 4 percent of state employment in Kentucky in 2011, to jobs created directly, indirectly, or induced, from the oil and natural gas industry. The industry directly employed 33,374 people, or 1.4 percent of state total employment. Indirectly the industry employed 26,918 people and induced 34,454 jobs.

Direct, indirect and induced labor income, according to this study, was $4.05 billion, totaling 3.8 percent of Kentucky's labor income in 2011. Direct labor income from the mining sector was $1.34 billion, or 1.3 percent of the state's total. Indirect labor income totaled $1.38 billion and induced labor income was $1.33 billion.[21]

Study for the Kentucky Oil and Gas Association

According to a study done in 2013 by the Kentucky Oil and Gas Association, "Slightly more than 9,000 Kentuckians are either salaried employees or proprietors in oil and gas and its support industries." Those in the industry had an average salary of $61,448, while those in supporting industries earned an average salary of $50,014. Using IMPLAN modeling this study found that the total value of the oil and gas industry in Kentucky in 2010 was $1,108,807,000.[12]

Environmental impact

Because of the sudden and unprecedented growth in fracking across the United States, getting high-quality, unbiased, state-specific information on the environmental impacts of fracking can be difficult. Most studies that would fit those first two qualifications are government studies that focus on the nation as a whole. As such, much of the information that follows in this section may only apply generally to the state. State-specific information has been added where possible.

Air

As with any type of energy extraction, there are several areas of risk when it comes to air quality. In the case of fracking, these risks include air pollutants such as volatile organic compounds (VOCs) and methane. Some environmental groups have raised concerns that methane could be leaked during the extraction process, resulting in unnecessary pollution.[22][23] Most of this pollution occurs during the well completion phase. Fracking operations can also emit known carcinogens, which have been linked with increased rates of cancer.[24]

Emissions

With regard to carbon dioxide, when natural gas is used to generate electricity in power plants, it produces fewer carbon emissions than coal-fired power plants. According to a 2014 study by the National Oceanic and Atmospheric Administration, "as a result of the increased use of natural gas, CO2 emissions from U.S. fossil-fuel power plants were 23% lower in 2012 than they would have been” without the increase in natural gas use.[25] During the extraction process, however, methane is emitted, and methane actually traps 20 times more carbon dioxide than other greenhouse gases. Nevertheless, according to the International Energy Agency (IEA), CO2 emissions in the United States dropped by 3.8 percent in 2012, due in large part to the "increased availability of natural gas, linked to the shale gas revolution."[26][25]

A 2014 report from the U.S. Environmental Protection Agency found a decrease of 3.3 percent in overall greenhouse gas emissions and a 12 percent decrease in methane emissions from 2011 to 2012. Natural gas extraction is the second largest producer of methane, after cattle.[23][27]

Earthquakes

Geologic map of Kentucky

The central and eastern United States have been experiencing an increased number of earthquakes over the last few years, according to the U.S. Geological Survey (USGS), the government agency responsible for such data. Studies from the USGS have not found fracking directly responsible for this increase in felt earthquakes; however, the USGS is looking into regulations that would use seismic data to determine thresholds dictating when and where fracking can occur.[28] There is a growing body of evidence suggesting that this growth in the number of earthquakes has been caused by the increased use of injection wells to dispose of fracking wastewater. While fracking has been rarely known to cause earthquakes, there is an established scientific link between earthquakes and the disposal of fluids in deep, underground injection wells. Once a well has been fracked, the water returned to the surface is called wastewater, and contains large amounts of salt and other contaminants.[29] Some of this water can be recycled, but that water which can't be recycled is often stored in injection wells. These injection wells are generally considered the safest and most cost-effective place for wastewater to be stored. Injection wells are located thousands of feet underground and are encased in cement. Multiple drilling wells often rely on one disposal well for wastewater storage. The U.S. Environmental Protection Agency estimates there are 144,000 of these wells across the United States receiving 2 billion gallons of frack fluid per day.[28][30]

Induced seismology, or man-made earthquakes, have been around for decades and can be caused by mining, damming rivers and injecting fluids into underground wells. Earthquakes are caused by injection wells when water pumped into underground wells causes the faults under the earth to slip. Even though scientists at the USGS have been able to cause earthquakes intentionally by carefully injecting liquid into the earth, the link between injection wells and earthquakes is not fully understood. One of the largest concerns for scientists and regulators is that they do not have the tools to predict whether wastewater will cause seismic activity. These concerns are compounded by the lack of knowledge about where faults are located across the central and eastern United States. The USGS is just beginning to map these areas in more detail in order to understand the seismic risks. As of June 2014, these earthquakes have typically been small, two or three in magnitude on the Richter scale, but at least one scientist has raised concerns that earthquakes could grow in intensity if old injection wells continue to be used for storage.[28][29]

Policypedia
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State energy policy

State fracking policy

Energy policy terms

Fracking in the U.S.

Energy use in the U.S.

Energy policy in the U.S.


See also
Local fracking on the ballot

Statewide fracking on the ballot

Water

When it comes to water protection and fracking there are four main areas of risk: the depletion of fresh water sources, spills and leaks of fracking fluid into water, mismanaged produced water and flowback, and stormwater pollution. Stormwater, flowback, produced water and wastewater can be harmful because they contain total dissolved solids and naturally occurring radioactive materials. Because of the recent rapid growth in fracking, there are still many uncertainties about the effects of fracking on water. There are studies that link fracking to groundwater contamination, but they remain controversial. The U.S. Environmental Protection Agency is releasing a report in spring 2015 on the potential impacts of fracking on drinking water, and is working on effective programs for managing these potential risks.[24][31]

One of the main criticisms of fracking is that the process uses a disproportionately large amount of water. Up to 10 million gallons of fresh water may be required to frack one well. A 2014 study from the Bureau of Economic Geology at the University of Texas found, however, that the amount of water used in a traditional well, versus a hydraulically fractured well, is not appreciably different. According to one of the researchers, Dr. Bridget Scanlon, "The water used to produce oil using hydraulic fracturing is similar to the water used in the U.S. to produce oil using conventional techniques." The only difference between the amount of water used during the two oil or gas production techniques, is when in the process water is used. The study was funded by the Alfred P. Sloan Foundation.[32][33]

Health

Because of the recent, rapid growth of fracking, little is known about the potential impacts to human health. Government agencies dealing with human health issues have raised concerns about some chemicals that can be released during the fracking process, including VOCs. The Centers for Disease Control are working with the EPA and federal, state and local agencies to better understand potential impacts.[34][35]

Socioeconomic impact

Fracking can also present challenges to communities. Increased oil and natural gas production happens in boom or bust cycles, and often these cycles disproportionately occur in rural communities. Large scale fracking booms can also lead to increases in crime, such as substance abuse, sex trade and domestic abuse. An influx of oil and gas workers also strains housing and traffic resources. This lack of housing can push oil and gas workers into so-called 'man camps,' which are "clusters of mobile homes, RVs, and trucks," or into hotels. A fracking boom also puts heavy traffic on roads, which can strain infrastructure, increase traffic accidents, and increase the likelihood of oil spills. Local governments respond by hiring more police, social workers, health care workers and emergency response personnel, thereby spending more of their budgets on roads and social programs. Currently, much of the tax revenue generated by the oil and gas industry goes to the federal and state government, not the local governments.[24]


Departments, agencies and organizations

  • The Kentucky Department for Natural Resources is a department within the Energy and Environment Cabinet. The department is comprised of eight divisions: Abandoned Mine Lands, Conservation, Forestry, Oil and Gas, Mine Permits, Mine Reclamation and Enforcement, the Office of Mine Safety and Licensing and the Office of the Kentucky Reclamation Guaranty Fund.[36]
  • The Kentucky Division of Oil and Gas, an agency of the Kentucky Department for Natural Resources, was established in 1960. The Division of Oil and Gas is responsible generally for "fostering conservation of all mineral resources, encouraging exploration of such resources, protecting the correlative rights of land and mineral owners, prohibiting waste and unnecessary surface loss and damage, and encouraging the maximum recovery of oil and gas from all deposits." The agency is also responsible for oil and gas well permitting.[4]
  • The Kentucky Department for Environmental Protection is a department within the Energy and Environment Cabinet. The department is comprised of six divisions: Air Quality, Compliance Assistance, Enforcement, Environmental Program Support, Waste Management and Water.[37]

Major organizations

  • Formed in 1931, the Kentucky Oil and Gas Association (KOGA) is a trade group that represents "the interests of Kentucky's crude oil and natural gas industry, and more particularly, the independent crude oil and natural gas operators." KOGA cites the following as its goals:[38]
Our goals include promoting, protecting and advancing the interest of the oil and gas industry; opposing any unfair and unjust legislation which may adversely affect the oil and gas industry; and, disseminating reliable publicity to further and protect the oil and gas industry.[38][39]
KOGA is listed as a "cooperating association" by the Independent Petroleum Association of America, which is a national trade group that "advocates its members' views before the U.S. Congress, the Administration and federal agencies."[40][41]

Natural gas use in Kentucky

For more information on energy consumption in Kentucky, see "Energy policy in Kentucky"

Electricity is the most common home heating source in Kentucky, heating almost half of the homes in the state. Natural gas is the second most common home heating source, at 39.1 percent, followed by LPG, other sources and then fuel oil.

Consumption of energy for heating homes in Kentucky
Source Kentucky 2011 U.S. average 2011
Natural gas 39.1% 49.5%
Fuel oil 1.2% 6.5%
Electricity 49.3% 35.4%
Liquid Petroleum Gases (LPG) 6.7% 5%
Other/none 3.7% 3.6%

Natural gas is used to produce only about 5 percent of the state's generated electricity, while the rest is produced from crude oil and renewable energy resources. Natural gas is extracted in the eastern part of Kentucky comes from Big Sandy, the largest natural gas field in the Appalachian Basin. The interstate pipeline companies that move the gas from the production area to local utilities and through to other states include: ANR Pipeline Co., Columbia Gas Transmission Corp., Columbia Gulf Transmission Co., Midwestern Gas Transmission Co., Tennessee Pipeline Co., Texas Eastern Transmission Corp., Texas Gas Transmission Co. and Trunkline Gas Co. The Federal Energy Regulatory Commission regulates the rates they charge, the services they provide to the local distribution centers (LDCs) and the construction of new pipelines.[2]

In Kentucky, natural gas is available from 28 companies, 50 intrastate pipeline gas companies and 172 municipal, housing authority, or college providers.[42][43]

Where electricity comes from in Kentucky[44]
Type Amount generated (MWh) % of state** % of U.S.**
Petroleum-fired 8,000 0.12% 0.03%
Natural gas-fired 74,000 1.08% 0.01%
Coal-fired 6,472,000 94.22% 0.37%
Hydroelectric 185,000 2.69% 0.06%
Other renewables 21,000 0.31% 0.01%
Total net electricity generation 6,869,000 100% 0.17%
**Note: Because the U.S. Energy Information Administration (EIA) does not include all of a state's energy production in these figures, the EIA totals do not equal 100 percent. Instead, we have generated our own percentages.

News items

This section displays the most recent stories in a Google news search for the term "Kentucky + Fracking"

All stories may not be relevant to this page due to the nature of the search engine.

Kentucky Fracking News Feed

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See also

External links

References

  1. Kentucky Revised Statutes, "Chapter 381, Section 430," accessed July 15, 2014
  2. 2.0 2.1 U.S. Energy Information Administration, "Kentucky Profile Analysis," updated December 18, 2013
  3. 3.0 3.1 Kentucky Waterways Alliance, "Fracking," accessed July 15, 2014
  4. 4.0 4.1 Kentucky Department for Natural Resources, "Division of Oil and Gas," accessed July 15, 2014
  5. KY Division of Oil and Gas, "Hydraulic Fracturing in Kentucky," accessed July 11, 2014
  6. Six thousand feet of gas equals about one barrel of oil, which equals about 19 gallons of gasoline.
  7. U.S. Geological Survey, "World level summary of petroleum estimates for undiscovered conventional petroleum and reserve growth for oil, gas, and natural gas liquids (NGL).," 2000, accessed April 23, 2014
  8. U.S. Energy Information Administration, "Frequently Asked Questions," May 30, 2013, accessed March 18, 2014
  9. Kentucky Energy and Environment Cabinet, "Division of Oil and Gas Production Reports," accessed July 11, 2014
  10. Kentucky Energy and Environment Cabinet, "Division of Oil and Gas Production Reports," accessed July 11, 2014
  11. Kentucky Geological Survey, "Predicting Cumulative production of Devonian Shale Gas Wells from Early Well Performance Data, Appalachian Basin of Eastern Kentucky," September 26, 2012
  12. 12.0 12.1 12.2 Kentucky Oil and Gas Association, "KOGA Releases Economic Impact Of Kentucky’s Oil and Gas Industry," June 17, 2013
  13. 13.0 13.1 "U.S. Geological Survey," "Illinois Basin Province," accessed March 1, 2014
  14. Indiana Department of Natural Resources, "DNR Oil and Gas Well Records," accessed July 10, 2014
  15. IHS, "US unconventional oil and gas revolution to increase disposable income by more than $2,700 per household and boost US trade position by more than $164 billion in 2020," accessed September 17, 2014
  16. Geology.com, “Mineral Rights,” accessed January 29, 2014
  17. Kentucky Division of Oil and Gas, "Landowner Information," accessed July 31, 2014
  18. IMPLAN, "IMPLAN€'s History of Expert Economic Data," accessed September 17, 2014
  19. REMI, "About Us," accessed September 17, 2014
  20. REMI, "Clients," accessed September 17, 2014
  21. 21.0 21.1 21.2 PricewaterhouseCooper LLP, "Economic Impacts of the Oil and Natural Gas Industry on the US Economy 2011," July 2013
  22. University of Oklahoma, "Hydraulic Fracturing and Water Resources," accessed March 15, 2014
  23. 23.0 23.1 Senate Committee on Energy and Natural Resources, "Written Testimony of Frances Beinecke," accessed March 2, 2014
  24. 24.0 24.1 24.2 Stanford Law School Student Journals, "Local Government Fracking Regulations: A Colorado Case Study," January 2014
  25. 25.0 25.1 Cooperative Institute for Research Environmental Sciences,, "New study: U.S. power plant emissions down," January 9, 2014
  26. International Energy Agency, "Redrawing the Energy-Climate Map," June 10, 2013
  27. The Wall Street Journal, "Talk About Natural Gas: Cow Belches Top Methane List," February 26, 2014
  28. 28.0 28.1 28.2 U.S. Geological Survey, "Man-Made Earthquakes Update," January 17, 2014, accessed March 10, 2014
  29. 29.0 29.1 National Geographic, "Scientists Warn of Quake Risk From Fracking Operations," May 2, 2014
  30. National Public Radio, "How Oil and Gas Disposal Wells Can Cause Earthquakes," accessed June 2, 2014
  31. U.S. Environmental Protection Agency, "Natural Gas Extraction - Hydraulic Fracturing," accessed March 10, 2014
  32. WOAI, "Research: Fracking Uses No More Water Than Traditional Oil Production," October 6, 2014
  33. Bureau of Economic Geology, "US Shale Reserves and Production Bureau Shale Gas Study," October 6, 2014
  34. U.S. Department of Health and Human Services, "Garfield County," March 13, 2008, accessed March 10, 2014
  35. Centers for Disease Control, "Review of Federal Hydraulic Fracturing Research," April 26, 2013, accessed March 10, 2014
  36. Kentucky Department for Natural Resources, "Welcome," accessed July 16, 2014
  37. Kentucky Department for Environmental Protection, "About Us," accessed July 16, 2014
  38. 38.0 38.1 Kentucky Oil and Gas Association, "History of the Kentucky Oil and Gas Association," accessed July 16, 2014
  39. Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
  40. Independent Petroleum Association of America, "About IPAA," accessed July 16, 2014
  41. Independent Petroleum Association of America, "Cooperating Associations," accessed July 16, 2014
  42. Think Kentucky, "Utilities in Kentucky Report," January 2013
  43. Kentucky Public Service Commission, "Information about Utilities," accessed March 7, 2014
  44. U.S. Energy Information Administration, "Kentucky Profile Analysis," accessed March 7, 2014