Fracking in Virginia

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Fracking in Virginia
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Regulation
Regulatory agency Department of Mines, Minerals and Energy; Division of Gas and Oil
Estate ownership Split[1]
Resources
Fossil fuels present Oil, natural gas and coal[2]
Fracking
Year fracking began 1950s[3]
Other state fracking pages
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Fracking in Virginia 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.

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.

For a full explanation of fracking, see "Fracking."

History

According to a report by the U.S. Geological Survey, the first exploratory oil and gas wells were drilled in southwestern Virginia in the 1890s. Commercial production of natural gas did not begin until 1931. Fracking has been practiced in Virginia since the early to mid-1950s.[3][4]

Production

The U.S. Energy Information Administration (EIA) has oil and natural gas production data going back to 1981 for Virginia. In 1981, 13,000 barrels of oil were produced in Virginia. Production quickly peaked for the years shown in 1983 when 65,000 barrels of oil were produced, after which production fell. Production was volatile, although it generally decreased steadily, until it reached a low of 5,000 barrels in 1998. In 2013, 9,000 barrels of crude oil were produced.[5]

Natural gas production data dates back to 1991, when 14,906 MMCF of gas was produced. Production generally increased across the years shown, with a sharp increase in 2003 when 143,645 MMCF of gas were produced. After that production sharply decreased, but surpassed 2003 levels in 2010. In 2012, 146,407 MMCF of natural were production.[6]

From 2000 to 2013, 1,118 permits were issued for gas wells. 170 permits were issued for horizontal gas wells and 25 permits were issued for oil wells.[7]

Oil production in Virginia.png
Natural gas production in Virginia.png

Areas of activity

Vicinity map of the George Washington National Forest

On November 18, 2014, the U.S. Forest Service released a new land use plan for the George Washington National Forest. This plan shrunk the amount of land available for oil and gas leases in the forest, from 995,00 acres to 177,000 acres. Of those 177,000 acres, private companies own the mineral rights for 167,000 acres, and the remaining 10,000 acres are available for oil and gas drilling. The forest lies on the edge of the Marcellus Shale, a highly productive oil shale formation, where significant oil and gas drilling, using fracking, has been occurring. Only about 10 percent of the George Washington National Forest lies in the state of Virginia.[8]

As of April 2011 there were not any active oil or gas wells in George Washington National Forest, and there has not been any drilling activity since the 1990s. There are two small natural gas fields adjacent to the forest, however. The map to the right shows the area around the forest.

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.[9]

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. As of June 2013, Virginia employed the following city and county license taxes on severed materials:

  • "1.5% gross severance tax on oil
  • 1% on gross severance tax on coal or gas
  • Counties and cities can levy an additional maximum 1% gross tax on gas
  • Cities and counties may adopt a maximum 1% gross tax on every person engaged in the business of severing coal or gas."

The revenue collected from an additional gas tax is deposited in the general fund of the respective county or city. Revenue from an additional county or city tax is deposited into the Coal and Gas Road Improvement Fund. Areas that comprise the Virginia Coalfield Economic Development Authority have 75 percent of their tax deposited into the Coal and Gas Road Improvement Fund. The remaining 25 percent is deposited into the Virginia Coalfield Economic Development Fund.[10]

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.[11]

Economic impact study

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.[15]

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 Virginia. According to the PwC study, the oil and gas industry added $12.46 billion in total value in 2011, including direct, indirect and induced value. Of this $3.45 billion, or 0.8 percent of the state's total value added, was direct, $4.06 billion was indirect and $4.96 billion was induced. In total, this accounted for 2.9 percent of the state's total value in 2011.[15]

Employment

The PwC study attributes 141,599 jobs, or 3 percent of employment in Virginia in 2011, to jobs created directly or indirectly by, or induced from, the oil and natural gas industry. The industry directly employed 46,979 people, or 1 percent of state total employment. Indirectly the industry employed 35,895 people and induced 58,725 jobs.

Direct, indirect and induced labor income, according to this study, was $7.22 billion, totaling 2.5 percent of Virginia's labor income in 2011. Direct labor income from the mining sector was $1.66 billion, or 0.6 percent of the state's total. Indirect labor income totaled $2.64 billion and induced labor income was $2.92 billion.[15]

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.[16][17] 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.[18]

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.[19] 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."[20][19]

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.[17][21]

Earthquakes

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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.

State environmental policy


See also
Local fracking on the ballot

Statewide fracking on the ballot

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.[22] 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.[23] 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.[22][24]

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.[22][23]

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.[18][25]

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.[26][27]

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.[28][29]

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.[18]

Departments, agencies and organizations

  • The stated mission of the Virginia Department of Mines, Minerals and Energy (DMME) is to "enhance the development and conservation of mineral resources in a safe and environmentally sound manner to support a more productive economy." The department is comprised of five divisions:[30]
    • Division of Mineral Mining
    • Division of Geology and Mineral Resources
    • Division of Gas and Oil
    • Division of Mines
    • Division of Mined Land Reclamation
In fiscal year 2014, the department's general fund budget totaled $11,988,992 and the non-general fund budget totaled $22,460,941. Approximately 42 percent of the department's funding came from the federal government.[30]
  • Within the DMME, the Division of Gas and Oil is responsible for "regulating the effects of gas and oil operations both on and below the surface, issuing permits, client assistance programs, inspection of well sites and gathering pipelines, reclamation of abandoned well sites, protection of correlative rights and promotion of resource conservation practices." The Virginia Gas and Oil Board, the governing body of the Division of Gas and Oil, is comprised of seven members appointed by the governor. There must be one representative each from the gas, oil and coal industries. The remaining four members cannot be representatives of the gas, oil or coal industries.[31][32]
  • The Virginia Department of Environmental Quality (DEQ) "administers state and federal laws and regulations for air quality, water quality, water supply and land protection." The department was formed in 1993. The department's budget for fiscal year 2014 was $153,767,475.[33][34][35]

Major organizations

  • The Virginia Oil and Gas Association (VOGA) is a trade group "representing the interests of companies, partnerships, individuals or other entities having an interest in the oil and gas industry." VOGA was founded in 1977. VOGA 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."[36][37][38]
  • Wild Virginia is a self-described "grassroots, non-profit organization dedicated to preserving wild forest ecosystems in Virginia's national forests through education and advocacy." The group is actively involved in anti-fracking activities.[39][40]

Natural gas use in Virginia

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

In 2011, roughly one quarter of Virginia's energy use was for residential purposes and one quarter was for commercial purposes. About one-fifth of Virginia's energy was consumed for industrial purposes. The largest source of energy consumption was transportation, which took up approximately 30 percent. Most of the energy used in the state is in the form of petroleum (used primarily for transportation), followed by natural gas, coal and then nuclear electric power. Per capita energy consumption in Virginia is below the national median.[2]

Consumption of energy for heating homes in Virginia
Source Virginia 2011 U.S. average 2011
Natural gas 33.9% 49.5%
Fuel oil 6.5% 6.5%
Electricity 51.6% 35.4%
Liquid Petroleum Gases (LPG) 4.4% 5%
Other/none 3.6% 3.6%

Virginia produced 1,087.8 trillion BTU of energy in 2011. Of that, just under 25 percent came from nuclear and just over 50 percent came from coal. Less than one percent came from crude oil. About 14 percent came from natural gas. The remaining nine percent came from what the U.S. Energy Information Administration classifies as 'other' renewable energies.[41]

Natural gas surpassed coal-fired generation for the first time in 2012. Similar to most states on the East Coast, the majority of Virginia's natural gas supply is transported through several major interstate pipelines. Virginia receives its natural gas supplies from the Gulf Coast region and the Appalachians. However, increased natural gas production in Pennsylvania has led to proposals to reverse flow on interstate pipelines that deliver natural gas to the Northeast. This would allow natural gas supplies to flow from Pennsylvania to Virginia. Pipelines in Virginia include Columbia Gas Transmission Corp., Cove Point LNG LP., Dominion Transmission Co., East Tennessee Natural Gas Co. and Transcontinental Gas Pipeline Co.[2]

Where electricity comes from in Virginia[42]
Type Amount generated (MWh) % of state** % of U.S.**
Petroleum-fired 12 0.19% 0%
Natural gas-fired 1,850 29.94% 0%
Coal-fired 1,786 28.91% 0%
Nuclear 2,222 35.97% 0%
Hydroelectric 72 1.17% 0%
Other renewables 282 4.56% 0%
Total net electricity generation 6,178 100% 0%
**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

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See also

External links

References

  1. Virginia Department of Mines, Minerals and Energy, "Natural Gas and Surface Owner Rights in Virginia," accessed July 18, 2014
  2. 2.0 2.1 2.2 U.S. Energy Information Administration, "Virginia Profile Analysis," updated December 18, 2013
  3. 3.0 3.1 Virginia Department of Mines, Minerals and Energy, "Hydraulic Fracturing in Virginia," accessed July 18, 2014
  4. United States Geological Service, "Oil and Gas Wells Drilled in Southwestern Virginia Before 1950," accessed July 18, 2014
  5. U.S. Energy Information Administration, "Crude Oil Production," July 30, 2014
  6. U.S. Energy Information Administration, "Natural Gas Gross Withdrawals and Production," July 31, 2014
  7. Virginia Department of Mines, Minerals and Energy, "Permit Issuance," accessed September 8, 2014
  8. Times Dispatch, U.S. OKs fracking in GW National Forest," November 18, 2014
  9. 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
  10. National Conference of State Legislatures, "State Revenues and the Natural gas Boom: an Assessment of State oil and gas Production Taxes," June 2013
  11. Geology.com, “Mineral Rights,” accessed January 29, 2014
  12. IMPLAN, "IMPLAN€'s History of Expert Economic Data," accessed September 17, 2014
  13. REMI, "About Us," accessed September 17, 2014
  14. REMI, "Clients," accessed September 17, 2014
  15. 15.0 15.1 15.2 PricewaterhouseCooper LLP, "Economic Impacts of the Oil and Natural Gas Industry on the US Economy 2011," July 2013
  16. University of Oklahoma, "Hydraulic Fracturing and Water Resources," accessed March 15, 2014
  17. 17.0 17.1 Senate Committee on Energy and Natural Resources, "Written Testimony of Frances Beinecke," accessed March 2, 2014
  18. 18.0 18.1 18.2 Stanford Law School Student Journals, "Local Government Fracking Regulations: A Colorado Case Study," January 2014
  19. 19.0 19.1 Cooperative Institute for Research Environmental Sciences,, "New study: U.S. power plant emissions down," January 9, 2014
  20. International Energy Agency, "Redrawing the Energy-Climate Map," June 10, 2013
  21. The Wall Street Journal, "Talk About Natural Gas: Cow Belches Top Methane List," February 26, 2014
  22. 22.0 22.1 22.2 U.S. Geological Survey, "Man-Made Earthquakes Update," January 17, 2014, accessed March 10, 2014
  23. 23.0 23.1 National Geographic, "Scientists Warn of Quake Risk From Fracking Operations," May 2, 2014
  24. National Public Radio, "How Oil and Gas Disposal Wells Can Cause Earthquakes," accessed June 2, 2014
  25. U.S. Environmental Protection Agency, "Natural Gas Extraction - Hydraulic Fracturing," accessed March 10, 2014
  26. WOAI, "Research: Fracking Uses No More Water Than Traditional Oil Production," October 6, 2014
  27. Bureau of Economic Geology, "US Shale Reserves and Production Bureau Shale Gas Study," October 6, 2014
  28. U.S. Department of Health and Human Services, "Garfield County," March 13, 2008, accessed March 10, 2014
  29. Centers for Disease Control, "Review of Federal Hydraulic Fracturing Research," April 26, 2013, accessed March 10, 2014
  30. 30.0 30.1 Virginia Department of Mines, Minerals and Energy, "Strategic Plan, 2012-2014," accessed July 18, 2014
  31. Virginia Department of Mines, Minerals and Energy, "Division of Gas and Oil," accessed July 18, 2014
  32. Virginia Department of Mines, Minerals and Energy, "Division of Gas and Oil Board," accessed July 18, 2014
  33. Virginia Department of Planning and Budget, "2012 - 2014 Biennium - Final Budget," accessed July 18, 2014
  34. Virginia Department of Environmental Quality, "About DEQ," accessed July 18, 2014
  35. Virginia Department of Environmental Quality, "Timeline of Key Events," accessed July 18, 2014
  36. Virginia Oil and Gas Association, "About Us," accessed July 18, 2014
  37. Independent Petroleum Association of America, "About IPAA," accessed July 16, 2014
  38. Independent Petroleum Association of America, "Cooperating Associations," accessed July 16, 2014
  39. Wild Virginia, "Fracking Campaign," accessed July 18, 2014 (dead link)
  40. Wild Virginia, "About Us," accessed July 18, 2014
  41. U.S. Energy Information Administration, "State Energy Data System, Production," accessed February 18, 2014
  42. U.S. Energy Information Administration, "Virginia Profile Overview," accessed March 2, 2014