World Wildlife Fund Says “No” to Gas & Oil Money;

But Nature Con$ervancy Takes Gas Money & Issues Pre$$ Releases

$pectra Energy & Gas Industry Launder Brand Via Contribution$

Nature Conservancy “Honored To Have Spectra Energy As Partner”

There are no greater environmental advocates than landowners who are fighting to protect their property rights, their health, their livestock and their water supply from contamination connected to gas drilling operations.

The Nature Conservancy (TNC) calls itself, “a leading conservation organization working around the world to protect ecologically important lands and waters for nature and people.”

Protect land and water for which people?

We ask the question because TNC takes money from gas companies like Spectra Energy without any process to confirm whether such financial contributors meet TNC’s brand promise of “Protecting nature.  Preserving life.”

WWF – No to Oil & Gas Industry

The World Wildlife Fund (WWF), in contrast, accepts no money from oil and gas companies, according to Spokesperson Kerry Zobor.

In fact, “WWF has a network-wide moratorium on accepting money from oil and gas companies,” Zobor told this blog.  In other words, this is not just U.S. policy.  It is a worldwide policy.  The moratorium became official in 2003 and there is “no expiration date.”

Contrast its position with The Nature Conservancy which takes cash from gas companies and issues press releases like this:  “Spectra Energy Supports Forest and Freshwater Conservation Work in Central Pennsylvania.”  Pdf file: the-nature-conservancy-in-pennsylvania-spectra-energy-supports-forest-and-freshwater-conservation-work-in-central-pennsylvania

In Mississippi, The Nature Conservancy’s chapter there produced an impressive four-color annual report that features a full-page salute to Spectra Energy and notes that, “The Nature Conservancy is honored to have Spectra Energy as a partner….”  Pdf file (see Sec 1:5 when you open the file): nat-con-ms-ar-08

This is the same Spectra Energy that:

• Seized property rights from landowners under the threat of eminent domain in order to develop a 12-billion cubic feet underground natural gas storage field in Bedford County, Pennsylvania, called Steckman Ridge.  The site currently has 13 injection/withdrawal wells and approval for every drilling mud and hydraulic fracturing component it could possibly use, from the Federal Energy Regulatory Commission.
• Since August, Spectra Energy’s Steckman Ridge facility has received two Notice of Violations for “unlawful conduct” from the Pennsylvania Department of Environmental Protection (DEP).¹ [See "Links & Resources" below.]
• Spectra Energy is tied at #7 on the EPA’s Top 21 list of the highest civil penalties over 25 years.  Spectra Energy’s $15 million federal penalty was earned because of massive Polychlorinated Biphenyls (PCB) contamination along its Texas Eastern 9,000-mile pipeline.² Pdf file: nets-top-civil-penalty-cases-w-texas-eastern1 [See also "Links & Resources" below.]
• For the Mississippi chapter, Spectra Energy left a PCB imprint in that state where the Department of Environmental Quality (DEQ) has been testing for PCBs on two rivers in the Pearl River basin for roughly 20 years.³ [See DEQ technical report published in 2004; pdf file: pearlrbconehomayockpcbjan04 ]  [See also "Links & Resources" below.]
• Spectra Energy does not like to talk about the catastrophic failure at its Moss Bluff storage field outside of Houston in 2004, with two explosions, 6 days of fire with flames as high as 1,000 feet and two evacuations.⁴ [See "Links & Resources" below.]

Nature Conservancy – Show Us the $$$

When asked about the Spectra Energy financial contribution, Misty Edgecomb, Media Relations Manager for the Pennsylvania chapter of The Nature Conservancy, replied [emphasis added]:

“The press release about Spectra Energy’s donation … provides our motivation for accepting the gift – the funds are dedicated to important forest and freshwater conservation work in Pennsylvania …. Our general standard is that we accept funds based on the conservation value of the work that will be accomplished. Our priorities are set by conservation staff based on scientific research, not by our donors.”

In other words, The Nature Conservancy will take money from anybody without holding them to any environmental or health standards whatsoever — as long as TNC can use the money for its purpose.

That system works for Spectra Energy and the gas industry because it is an opportunity to launder their brand; and earn implicit support from an environmental organization which doesn’t look closely at the company’s performance record.

As the bulleted list above suggests, Spectra Energy – and many gas companies – have performance records that look like a rap sheet (and we’re not talking “rap” music).

The answer for Spectra Energy and many gas companies is to spread money around – instead of improving operational performance where safety and the environment are concerned.

This is merely a different form of lobbying and, under its current practice, The Nature Conservancy tells the public it is “honored” to have Spectra Energy as a partner while turning a blind eye to environmental and safety issues in the communities where Spectra Energy operates.

Spectra Energy’s hope is that the sound of applause will drown out the grinding sound of compressor shutdowns, liquid and gas emissions, notices of “unlawful conduct,” concerns over water contamination and more.

However, there is nothing to prevent The Nature Conservancy from reconsidering its policy of taking money from gas and oil companies.  A little hope and change might work here.

Links & Resources

¹ Spectra Energy’s Response to Pennsylvania Department of Environmental Protection’s Notice of Violation for “unlawful conduct.” In addition to analysis, this post contains pdf files of the actual DEP notice and Spectra Energy’s response, plus links to Pennsylvania code citations.  Link: http://www.spectraenergywatch.com/blog/?p=466

^{2, 3} Spectra Energy Acknowledges PCB Contamination. Post contains much information with sources that include Spectra Energy government filings, and documents from EPA and Mississippi Department of Environmental Quality (DEQ).  For EPA top 21 list of civil penalties, for example, see section in post under subhead “EPA ‘Celebrates’ Spectra Energy.” For Mississippi DEQ report, see section in post under subhead “Don’t Eat the Fish.” Link: http://www.spectraenergywatch.com/blog/?p=498

⁴ Moss Bluff Incident – Spectra Energy’s 2004 catastrophic failure at its Texas storage field. In addition to description and analysis, this post contains an abstract on well integrity published by the Geological Society, London, which focuses on “Lessons Learned from incidents in the USA.”  Also links to Industrial Fire World Magazine, among other sources.  Link: http://www.spectraenergywatch.com/blog/?p=390

World Wildlife Fund describes itself as “the world’s leading conservation organization, working in 100 countries for nearly half a century. With the support of almost 5 million members worldwide, WWF is dedicated to delivering science-based solutions to preserve the diversity and abundance of life on Earth, halt the degradation of the environment and combat climate change.”  Link to WWF’s website: www.worldwildlife.org/

The Nature Conservancy states on its home page that it “protects Earth’s most important natural places – for you and future generations – through great science and smart partnerships.”  Some of those partnerships raise questions, not IQ.  Link to TNC’s website: http://www.nature.org/

Laundering the Brand – In addition to giving money to environmental groups willing to accept it, Spectra Energy gives money to sports sponsorships, and shows up at 4H events and more.  See post at this link: http://www.spectraenergywatch.com/blog/?p=257

Man on Fire:

Lease Owner Now Gas Industry Critic,

Based on Experience with Range Resources;

Company Treated Property Like Landfill, He Says

Visits Clearville, PA; Comments on Spectra Energy

Ron Gulla is a man on fire.  He is unrepentant in his criticism of the gas industry, based on personal experience with Range Resources, a company that Spectra Energy calls “the leading Marcellus Shale producer.”

Type Gulla’s name into an internet search engine like Google, and his name produces twenty times more hits than Range Resources’ CEO, John Pinkerton Cramer – more than 200,000 (and rising) for Citizen Gulla versus about 10,000 for CEO Cramer.

Ron Gulla owns a 141-acre farm in Hickory, Pennsylvania, and says Range drilled a Marcellus well on his property in 2005 – the second Marcellus well drilled in Pennsylvania.

His business relationship with Range Resources – begun on a hopeful note in 2002 when he signed the drilling lease – went south fast; and is now embroiled in a lawsuit filed by Gulla.  With experience in the equipment side of the oil and gas industry, Gulla alleges that:

• Range Resources treated his farm “like a landfill,” and “some DEP reps are lying so badly, they should be in prison.”
• Range Resources contaminated his 2.5-acre pond in 2006.
• Range Resources put mill slag on his property for a road, and the slag contains heavy metals.  (Slag is a waste product of metal production, such as from a steel mill.)

Today, Gulla seems to be everywhere “trying to educate folks as to what is going on with gas drilling in Pennsylvania and elsewhere.”

He works with groups like Damascus Citizens for Sustainability and the Pittsburgh chapter of Clean Water Action.  He distributes copies of the film Split Estate for showing to groups, and is in communication with Debra Anderson, the director/producer of the film.  [See "Links & Resources" below.]

He talks to landowners, legislators and Ph.Ds.  Property owners from as far away as New Mexico contact him to share information.

Advice to Property Owners

For property owners wondering whether they should sign gas leases, Gulla’s advice is:  “Never lease.  Why would you want someone to come on your property and dump chemicals?”

Even with his experience selling equipment to the gas industry, he did not realize at the time, for example, that the industry is exempt from disclosing the chemical content of fluids used in the hydraulic fracturing process.  This is the drilling technique used to drill horizontal wells in the Marcellus Shale.  He admits that he did not research it back then; and he wants other landowners to avoid his mistake.

“These are not the ‘mom and pop’ gas wells drilled years ago,” Gulla told this blog.  “Gas wells today are a totally different animal; there is so much more pressure blown into the ground.”

Range Resources

Matt Pitzarella is Public Affairs Director of Range Resources’ Marcellus Shale Division, and is based in Canonsburg, Pennsylvania.

In a conversation with this blog, he disputes claims that Range Resources contaminated Ron Gulla’s pond.  “His claims of water contamination have been investigated and proven unsubstantial.”

He agrees that, “The state was not used to modern natural gas development.  It is a matter of an evolution.  Now it makes more sense to update and enhance current regulations.”

Hiring State Employees

Last year, Range Resources issued a press release commending Pennsylvania Governor Rendell and the Department of Environmental Protection (DEP) for “an improved Marcellus Shale … regulatory program” and for the formation of a joint DEP/Industry partnership.  Link to pdf file:  range-commends-1-09

In October, Governor Rendell’s executive deputy chief of staff, K. Scott Roy, left his government job to join Range Resources as vice president for government relations and regulatory affairs.  The company press release cited Roy for his public service experience, including, “acting as the Governor’s liaison to various regulatory and environmental agencies.”  Link to pdf file:  rr-hires-scott-roy

Range Resources is also hiring DEP field staff because “the industry is going to have to self police itself in order to regulate itself,” Pitzarella said.

Pennsylvania Lobbying $$$

In addition, the company spends money at the state and federal level to lobby legislators.  In Pennsylvania alone, the total spend for Range Resources lobbying for 2009 was $307,136, as reported on the Pennsylvania Department of State website.  [See "Links & Resources" below.]

In similar fashion, its industry colleague and partner in a “binding agreement,” Spectra Energy, spent nearly $200,000 in Pennsylvania alone in 2009, as reported on the Pennsylvania Department of State website. [See "Links & Resources" below.]

Thus, just two energy companies spent one-half million dollars last year lobbying in one state.  That figure does not include money spent in other states and at the federal level.

Relations with Ron Gulla

When asked what went wrong in the relationship between the company and Gulla, Pitzarella said, “I can’t tell you why that relationship soured.  I think, early on, there were probably some mistakes that were made in communications.  We are dealing with emotion – we have not been able to have a civil discussion.”

“Range is the leader in the Marcellus,” Pitzarella said.  “We pioneered it.  The actual discovery happened October 24, 2003 in Washington County, Pennsylvania.  It was the first Marcellus well in the state.”  (The well, known as Renz #1, was “completed” in October of 2004; and gas production from the well began in 2005.)

“Ron was in the middle of the evolution of the industry – we’re doing better now.”

According to Pitzarella, it is in the company’s interest to follow regulations because it has more than one billion dollars invested in the Marcellus in Pennsylvania.  [See "Links & Resources" below.]

“I don’t think the industry has done a very good job in being transparent and educating the public,” he acknowledges.  “Skepticism is a good thing.  We can’t live in a ‘trust us’ environment.  We need to deal with the facts.”

Gulla is a confirmed skeptic who does not trust the gas industry; and transparency is his mission.

Spectra Energy in Bedford County, PA

He has traveled to many places in Pennsylvania and New York, getting out the word and talking with landowners dealing with the gas industry.  This includes Bedford County, PA.  While there, he met with Wayne and Angel Smith, who are dealing with contaminated water on their property in the Clearville area and who have filed a lawsuit against Spectra Energy.

Spectra Energy operates a 12 billion cubic feet underground natural gas storage field in the Clearville area of Bedford County.  The company injects gas into a “depleted” reservoir in the Oriskany formation for a fee.  It then withdraws gas, for example, and moves it through its Texas Eastern pipeline system for sale in the northeast.

A nearly 5,000 horsepower compressor is used to inject and withdraw gas.  Since late August, there have been at least four unplanned shutdowns of the compressor.  The first shutdown resulted in release of gas and an oily contaminant over neighboring properties including gardens and ponds.

To date, Spectra Energy has received two notices of violation from the DEP for “unlawful conduct.”

After visiting Clearville, Gulla told this blog:  “This part of Bedford County is a gorgeous area, but it is in a terrible situation.  It made me sick to see what is happening there since Spectra Energy’s storage field began operation.  Dead live stock; residents complaining about various health symptoms, from numbness and twitching to visible growths or tumors and elevated arsenic levels.”

Miracle of the “Breathing” Waters

After meeting with numerous residents, he was given a tour of the Clearville area as it relates to Spectra Energy’s compressor station.

Property Owners Angel and Wayne Smith told Gulla and this blog that they suspect Spectra Energy’s storage field operations could be connected to the water aquifer, because when Spectra Energy’s compressor station is operating, the Smiths can observe the rising and falling water level in their well, their pond and a creek.

For example, when the company takes gas out of the underground storage field, it pulls water with it – the pressure is released and the water level in the pond and creek drops.  When Spectra Energy’s compressor shuts down or stops pulling out gas and water, the water level in the pond rises.

“The level in the pond has dropped more than 3 feet at times,” Angel said.  “So when the compressor is operating, the water level drops.”

‘Something is Wrong’

According to a source familiar with gas operations, “Something is wrong.  I suspect that one or more of Spectra’s storage wells has a defective surface casing and is not protecting the fresh water aquifers/zones in the storage formation; and may be causing contamination to all linking fresh water aquifers/zones in the area.

“This shouldn’t happen,” he said, “if the fresh water sands or water acquifers/zones were being adequately protected and sealed by Spectra’s surface casing in each of Spectra’s wells.”

As property owners fighting for their rights and their health, the Smiths admire what Ron Gulla is doing.  “He is such a wonderful person, words can’t express how highly Wayne and I think of him and what he is doing for property owners,” said Angel Smith.

Ron Gulla is a man on fire.  And he is bringing that fire to the gas industry.

Links & Resources

Gas Wells Are Not Our Friends website:

http://dearsusquehanna.blogspot.com/2009/06/ron-gulla-and-don-barber-speak-ay.html

Ron Gulla on video speaks at Broome Community College, NY (10 minutes)

Split Estate – a high-quality, 76-minute documentary film about the challenges faced by property owners in several western states as they deal with energy companies that seem to have no boundaries.  The title refers to the fact that in these states, mineral rights are often severed from surface rights in such a way that property owners have little control over their property.  Health and environmental problems follow.  Link:  http://www.splitestate.com/

Damascus Citizens for Sustainabiity (DCS) – a grassroots group in Damascus, PA.  Link: http://www.damascuscitizens.org/index.html

Clean Water Action – a grassroots environmental action group with national reach.  Link: http://www.cleanwateraction.org/

Range Resources 2009 Lobbying Expenses in Pennsylvania – pdf file from the Pennsylvania Department of State:  rr-lobbying-09

Spectra Energy 2009 Lobbying Expenses in Pennsylvania – pdf file from the Pennsylvania Department of State:  se-pa-lobbying-09

Range Resources:  Marcellus Shale Best Practices – Two-page pdf file provided by Range Resources on its commitment “to responsibly developing our nation’s natural gas reserves.”  range-best-practices

Underground Gas Storage Leases

Driven by Threat of Eminent Domain;

Very Different From “Drilling” Leases

Toss Old Playbook;

Negotiate Smart, Identify True Comparable Value!

For landowners who want the best gas or mineral lease deal, your benchmark isn’t the person next door, or the “real estate” appraisal of your property.  It just might be the lease deal your government gets for public lands (which you pay for with tax dollars).

This is true even in cases where property and/or property rights are seized under the threat of eminent domain, such as underground natural gas storage fields or gas pipelines.  Storage leases are not mineral leases, and they come with their own challenges.

Storage leases often involve the threat of eminent domain.  Several states will see an increase in “taking” of private property rights for pipelines and underground gas storage fields.¹ (See Links & Resources at the bottom of this post for government details on underground gas storage fields.)

In the Northeast, much of that activity will be driven by gas and pipeline companies eager to cash in on the gas-rich Marcellus Shale.  This geological formation runs through parts of Pennsylvania, New York, West Virginia and Ohio.

We’ve also talked with property owners in Western states who are fighting underground gas storage fields.

A recent Pittsburgh Tribune-Review report on pipeline expansions in Western Pennsylvania says it all in this headline:  Texas Eastern Transmission’s tactics leave landowners feeling bullied.  Texas Eastern is the pipeline division of Spectra Energy; and it is bringing the threat of eminent domain to Pennsylvania and New Jersey.  Pdf file: texas-eastern-transmissions-tactics-leave-landowners-feeling-bullied-pittsburgh-tribune-review

Our two-year battle against Spectra Energy which seized our property rights for the Steckman Ridge 12-billion cubic feet underground natural gas storage field in Bedford County, PA, led to the development of this website.

Any property owner facing eminent domain quickly learns that they are not standing on a level playing field legally, economically or politically.  The 5th amendment to the U.S. Constitution states, “… nor shall private property be taken for public use, without just compensation.”

But there is a lot of play in the “just” of just compensation.  If you are impacted by underground gas storage fields or gas pipelines across your property, you need to know whether the gas or pipeline company has a sweetheart lease deal with the government.

Here’s why:  The gas or pipeline company’s “perfect world” business model is to seize your property rights – with the help of government – then pay you pennies on the dollar for its legal theft.

Gas companies treat government very differently, however, and the difference is educational.

For example, in lease agreements for underground gas storage fields:

• Private property owners typically receive a modest one-time payment driven in part by the number of acres.
• In contrast, state government leases typically include a long-term cash royalty payment for the amount of gas withdrawn and/or injected into the underground field.

Comparable Value Game

This is a huge discrepancy in what is known as comparable market value.  Politically, this different treatment is not sustainable in today’s world where we speak of transparency and equitable treatment under law.  It is time for landowners to throw out the old playbook.

If you want to know how to do that, keep reading.

After filing a right-to-know request with the Pennsylvania Game Commission, I received a copy of the storage lease for State Game Land 49 in Monroe Township, Bedford County, PA.² (See Links & Resources at the bottom of this post for a pdf file of the Game Commission “storage” lease discussed here.)

The difference in value between the Game Commission lease and a proposed offer we received from Spectra Energy (Steckman Ridge) is sobering.

In a letter dated April 16, 2008 from Ronnie L. Acorn, Rights-of-Way & Land Manager for the project, we were made a proposed offer of a total one-time payment of approximately $1,600 on our ten acres of land.

Your Right to Know

In contrast, the company’s lease agreement with our next-door neighbor (PA game lands) contains the following provisions:

• An annual minimum payment (“base rate”) of $15,067 OR a fee of $0.03 per thousand cubic feet (MCF) for 4.322% of the gas withdrawn from the total storage reservoir during the year — whichever is greater.
• In addition, a one-time bonus payment of $48,460.
• On top of that, there is a rental adjustment, which means that every 5 years, the base rate and the withdrawal rate will adjust upward by 3%.

Thus, along with a bonus payment and a 3% increase in the lease payment every 5 years, there is a 25-year annuity stream back to the state, in the form of a royalty for the amount of gas withdrawn from the underground storage field.

So “just compensation” for the state is very different from “just compensation” for private property owners — even when the acreage is next door.  That is where comparable fair market value must be applied — not on a real estate “appraisal” that does not take into account actual lease benchmarks like the one cited.

Now that you know what the true benchmark of value is (the gas company’s lease with state or federal government), it is time for a very strategic discussion with your attorney.

Remember the phrase, “But this is the way we’ve always done it?”

Change Strategy – Toss the Old Playbook

You and your attorney must collaborate to develop an assertive legal argument that positions a gas company’s lease with the state as a legitimate measure of fair market value.

Fair market value in cases like this must be more than surface use, or what similar acreage sold for.  It is very important to include the value of other storage leases – in particular gas company leases with the state.

Traditionally, few have made a big deal about the different lease agreements (state versus private property owners).

The law says you are entitled to just compensation, so here is what you and your attorney can do:

Wherever possible, the best benchmark of comparable fair market value is from the lease agreements that gas companies like Spectra Energy have with the government.

Beware of what I would call a “real estate” appraisal cobbled together by expensive consultants who may not even describe your property correctly.  If it does not take into account a lease like the Game Commission lease (see pdf file below), you and your attorney will want to shift strategic gears.

If your property is out west, look at all such leases, including any that may be on federal or tribal land.  This is your comparable fair market value benchmark.  It exists in real life.

Your Goal:  Just – Not Less – Compensation

Your goal is a mirror-image lease agreement (with adjustments for acreage and surface use) similar to what the gas company offered the state for use of taxpayers’ public lands.

You and your attorney need the following:

1. Understand what kind of appraisal is needed;
2. Include the right data as a foundation for the appraisal – specifically, locate similar storage lease agreements with the state;
3. Identify a knowledgeable expert witness who is comfortable with technical issues in the gas industry and can include an analysis of the state lease in the appraisal.

Your argument for fair market value might be stated along the following lines:

“Since Big Gas Corporation was willing to pay ($X) for the state acreage, then we should conclude that the value of other owners’ acreage in the same area used for the same purposes should be comparable.”

It is time to change the gas industry’s playbook.  Eminent domain is a large enough affront to property owners without adding separate and different forms of just compensation – one for citizens, and a better one for the state.

Links & Resources

¹Underground Gas Storage Fields – Energy Information Administration of the Department of Energy

According to this government source, there were just over 400 underground natural gas storage sites in the U.S., at the end of 2007.  “During the year, four  new storage sites were added, one in Michigan, Mississippi, Pennsylvania, and West Virginia, while 18 existing storage fields underwent expansions, and two storage fields were abandoned (ceased operations).”  (See subhead, “Underground Storage by U.S. Region.)  Link: http://www.eia.doe.gov/pub/oil_gas/natural_gas/analysis_publications/ngpipeline/undrgrnd_storage.html

²Storage Lease between Pennsylvania Game Commission and Spectra Energy (i.e., Steckman Ridge) – See especially all of Section 4:  “Annual Payment – Storage Fee/Rental.”  Pdf file: PAGameCommGasStorageLease09.pdf (9 MB)

Do You Ride 1^st Class or Coach with Your Gas Lease?

How Much is Your Royalty vs. Public Lands?

How do you get the best gas or mineral lease deal?  Easy.  Find out what lease deals the gas companies give to the government.

• The royalty percentage paid on government leases, for example, could be more than 50% higher than the royalty rate offered to private property owners.  Want to see a copy of such a lease?  Keep reading.

Sweetheart lease deals with government is a rock the gas industry would rather not turn over.  Negotiate with a government lease as your benchmark, not with your neighbor’s lease.

The gas industry has practiced a two-tiered leasing program for decades, but many property owners do not realize it.  First-class lease agreements go to state (or federal) government.  Coach-class lease agreements go to private property owners.

Public Lands

When we speak of gas lease agreements for government (state or federal), we are talking about drilling leases on public land.  Public lands, of course, refer to any taxpayer-financed land, such as game lands, state forest lands, or national parks.

Why would government get better lease deals from gas companies than citizens?

Governments are big and scary to energy companies; and landowners are not. So guess who gets preferential lease treatment?

In the politics of energy, gas companies are good at “managing up.”  They work hard to placate the “big and scary” government.  Government regulators monitor you and have many ways to penalize you, whether via the permit process, environmental inspections, violation notices, financial penalties and more.

This helps to explain the staggering amount of money spent to influence government.  The oil and gas industry spent $120 million lobbying the federal government alone in 2009, according to The Center for Responsive Politics.  Link: http://www.opensecrets.org/lobby/indusclient.php?year=2009&lname=E01&id=

Based on our own experience in Pennsylvania, fair compensation for the state is very different than fair compensation for private property owners — even when the acreage is next door.

Your Right to Know

After filing a right-to-know request with the Pennsylvania Game Commission, I received copies of two leases, both for State Game Land 49 in Monroe Township, Bedford County, PA.  (¹See Links & Resources at the bottom of this post for a pdf file of the Game Commission lease discussed here.)

The lease under discussion is an oil and gas lease signed in February 2002 – initially between the Pennsylvania Game Commission and Cabot Oil & Gas Corporation.  As it turned out, Pennsylvania General Energy Corporation (PGE), headquartered in Warren, PA, replaced Cabot and became the “successor to the initial lessee.”

This is a “drilling lease,” which involved recovery of native gas.  Ultimately, the wells were drilled into the Oriskany formation – so it was not a Marcellus Shale play.  Regardless, the difference in lease terms is revealing.

In 2003, approximately 90 landowners in the Clearville area of Bedford County, PA, signed lease agreements with Pennsylvania General Energy Corporation (PGE).

Landowners received royalties based on their lease agreements over a period of 3-4 years, until the wells were “depleted,” according to PGE.  In March 2007, PGE notified landowners via letter that it had “sold its Bedford County wells, pipelines, and associated equipment and leases to Steckman Ridge, LP.”

Steckman Ridge is a joint venture between Spectra Energy Corporation and New Jersey Resources.  We’ll have more to say about underground gas “storage” leases in a future post.

57% Higher Royalty Rate

According to the document, the Game Commission’s lease agreement included a royalty payment of 25 cents per thousand cubic feet of gas or 19.6% of the market value — whichever amount is greater.  [Sections 4.1, 4.2 of lease; p. 3; see pdf file below.]

In contrast, the royalty payment for roughly 90 property owners was 12.5% regardless of whether they owned 10 acres, 100 acres or more.  This is the minimum royalty rate set by Pennsylvania law — the traditional one-eighth royalty. Link:  http://www.dep.state.pa.us/dep/deputate/minres/oilgas/fs2834.htm

In other words, the Game Commission’s royalty rate is 57% better than the private property owners’ royalty rate – and many of those properties are next door to the Game Lands.

Size Matters

The Game Commission lease with PGE runs 26-pages, and that does not include another 18 pages of “exhibits.”  In contrast, the proposed lease that PGE first sent to us runs five pages.  (Never, ever sign the proposed lease given to you by an energy company.)

Looking for a model lease?  On top of a much better royalty payment, the Game Commission lease has additional examples of built-in protections that landowners should consider.

• Free gas – and the gas company pays for the hook up;

• Control of surface rights even where the company’s drilling operations are located.

Free Gas

Growing up in Pennsylvania, it was conventional wisdom that property owners often received free gas as part of their lease agreement.  That no longer appears to be the case today, though there must be some exceptions.

One of those exceptions is the Game Commission lease which says it is entitled to free gas, assuming sufficient production quantities.  And the gas company, at its expense, is responsible for setting up the facilities to do this, including putting in place the meter, regulator, lines and connections.  [Section 4.3 of lease; pp. 3-4; see pdf file below]

Surface Rights

Worried about well location, roads, pipelines and equipment?  In the current Marcellus Shale craze, we’ve talked to property owners who are livid about how their property is treated once drilling operations begin.

That is not going to happen in a lease with the Pennsylvania Game Commission.  This lease makes clear that, “The surface rights of Commission shall be considered dominant and the oil and gas rights of Lessee [i.e., PGE] servient.”  [Section 33.4 of lease; p. 24 of pdf file and print version; see pdf file below]

In fact, the Game Commission lease is very specific:

“Commission reserves the right to approve in writing all plans for the construction upon the leased premises of structures, rigs, machinery, communications facilities, ways and roads, well locations, pipelines and equipment and fro drilling wells.  Detailed written plans for any such construction shall be submitted to Commission at lease thirty (30) days prior to planned commencement of construction on the leased premises ….”  [Sections 33.3 of lease; p. 24; see pdf file below]

Next Steps

Regardless of where you live, and whether a potential lease offer involves the Marcellus or other formation, consider the following steps:

1. Even in an area where lease values are rising, that does not guarantee you will get the 1^st class lease agreement (versus coach class).  If there is public land in your area (e.g., state game or forest lands) find out if that is leased or a candidate for leasing.  Get a copy of that lease, either from the state or from the energy company.
2. If you have to file a right-to-know or freedom-of-information request, do so.  If the gas company holds a lease on public lands but declines to share that information with you – you already know the answer.
3. Seek out other benchmarks.  You already have access to a copy of one Pennsylvania Game Commission lease attached to this blog post.  Go on the internet.  Some states post sample leases which should be helpful.  Recently, the Associated Press reported that Pennsylvania solicited bids for drilling leases on public forest land in north central Pennsylvania.  The production royalty is pegged at 18%.²

As always, educate yourself and exercise informed tenacity.  It is your property; and you cannot depend on the kindness of strangers from the energy companies to do the right thing.  Negotiate from a position of knowledge.  You may not get everything you want in a lease; but there is no reason to settle for less.

Understand the power of numbers.  In states across the country, we are seeing more examples of property owners banding together in order to negotiate better gas leases.  Make it work for you.

If you negotiate a drilling lease, remember this is a business transaction.  It is not about making a new friend who is going to give you money and leave your property in pristine condition.  Be as tough minded as the gas companies and landmen.  If you set low expectations for yourself, they will be happy to meet them.

Decision Making — Important

By the way, as part of your education, if you are thinking about signing a gas lease – perhaps because of the hoopla over opportunities in the gas-rich Marcellus Shale, read the advice and perspective in our post, “Marcellus Powerball.”

Link: http://www.spectraenergywatch.com/blog/?p=494

Links & Resources

¹ Drilling Lease between Pennsylvania Game Commission and PGE for Game Lands 49, Bedford County, PA: Pennsylvania Game Comm Oil & Gas Lease 2002.pdf (file size 20mb)

² “5 Firms Submit High Bids for Gas Drilling in Pa.” – News report, January 13, 2010:  5-firms-submit-high-bids-for-gas-drilling-in-pa

Lobbying $$$ — See what Spectra Energy spent in Pennsylvania and in Washington.  Its 2008 expenditures put it in the top 10% of the oil and gas industry’s federal lobbying: http://www.spectraenergywatch.com/blog/?p=438

Toxic PCBs Are Still With Us;

Spectra Energy Acknowledges PCB Contamination

Toxic PCBs (polychlorinated biphenyl) still contaminate Spectra Energy’s Texas Eastern pipeline system – 30 years after the probable human carcinogen was banned.

This is evident from the company’s filings with the federal government and even from its job postings.

For example, in a required filing with the U.S. Securities and Exchange Commission (SEC), Spectra Energy acknowledged that it has toxic PCB (polychlorinated byphenyl) contamination in its pipeline systems:

“…the internal surfaces of some of our pipeline systems are contaminated with PCBs, and liquids and other materials removed from these pipelines must be managed in compliance with such regulations.”

Spectra Energy’s 10-K Form – Lots of Info

These and other acknowledgements of risk are found in the “10-K” annual report that Spectra Energy filed with the SEC on February 27, 2009.  Publicly held corporations like Spectra Energy are required to file a Form 10-K every year.  The 10-K is filled with a wealth of information and once it is filed with the SEC, it becomes public information.

Link: http://google.brand.edgar-online.com/DisplayFilingInfo.aspx?Type=HTML&text=%2526lt%253bNEAR%252f4%2526gt%253b(%22PAUL+M%22%2C%22ANDERSON%22)+%2526lt%253bOR%2526gt%253b+%2526lt%253bNEAR%252f4%2526gt%253b(%22PAUL+M.%22%2C%22ANDERSON%22)&FilingID=6443897&ppu=%2FPeopleFilingResults.aspx%3FPersonID%3D1914234%26PersonName%3DPAUL%2520M.%2520ANDERSON

Here, for example, is the excerpt referring to Spectra Energy’s PCB contamination under Environmental Matters (p. 20).  It reads (emphasis added):

• “The Toxic Substances Control Act, which requires that polychlorinated biphenyl (PCB) contaminated materials be managed in accordance with a comprehensive regulatory regime.  Because of the historical use of lubricating oils containing PCBs, the internal surfaces of some of our pipeline systems are contaminated with PCBs, and liquids and other materials removed from these pipelines must be managed in compliance with such regulations.”

When Spectra Energy hires environmental specialists, knowledge of PCBs is part of the job description.  For example, a recent Environment Health & Safety (EHS) job opening for “Specialist – EHS Associate” lists among the duties and responsibilities:

“Work on TSCA [Toxic Substances Control Act] Projects including but not limited to PCB reclassification/declassification of tanks and pipelines and management of PCB material.”  Link:  job-openings-us-spectra-energy

Two of three recent EHS job openings in Houston specifically mention PCBs.

Spectra Energy’s Group Vice President of Internal and External Affairs Toni Beck, previously said:  “We tested the lubricating oil from [Bedford County, PA] Steckman Ridge’s August shut down, and no PCB’s were detected.   If at any point other liquids are collected, we will test them as well.”

Testing the lubricating oil is necessary but not sufficient.

Test Pipeline Liquids for PCBs

Did the company test the liquids in ALL piping drains that pick up the pipeline liquids at the compressor station and the injection/withdrawal pipeline?  If so, what were the results?

When asked about testing the pipeline liquids, Ms. Beck replied (emphasis added):  “The liquid separators are designed to collect pipeline liquids from the gas stream to prevent potential PCBs from moving into the new system. To date, there have been no pipeline liquids collected at Steckman Ridge. If we do, those liquids would be tested for PCB concentrations prior to disposal.”

In other words, the pipeline liquids going into the Steckman Ridge underground gas storage field have neither been collected nor tested.  Why is this important?

There are three ways that such contaminated liquids can appear and escape a pipeline/compressor station system, according to a source knowledgeable about such operations.

The components of natural gas inside a pipeline can form a liquid; OR liquids are brought into the pipeline from a third-party interconnection; OR oils and greases are released from compressor stations, pipeline valves, or other processes.  It is the liquids and oils that pick up the PCBs; and if there is a release of liquid or oil from a contaminated system, it will contaminate the environment.

Release to the environment of toxic PCBs could occur in three ways:

1) Maintenance or Repairs: Contaminated liquids can escape the system when the company “opens” the system for repairs or routine maintenance.  Liquids can also be released during blowdown operations that take place prior to working on the system or other processes.

2) Cleaning “Pigs”: Liquid releases can take place when the company runs so-called “cleaning pigs” through the system because it is necessary to release gas from the system at the last stage of this operation before removing the cleaning pigs from the system.

3) Automation: When the automated system at Steckman Ridge or similar compressor stations or other types of facilities tells the valve to open and release gas through the blowdown stack.

What About the Water Aquifer?

On top of all of that – an important question arises regarding the integrity of an underground natural gas storage field or reservoir.  The question is whether liquids contaminated with PCBs or other toxic chemicals are introduced into the storage reservoir itself.

If the underground gas storage reservoir is near water aquifers, everything depends on the reservoir being perfectly sealed from other reservoirs and aquifers and able to contain the contamination.

Experts know that gas migrates underground.  There are multiple examples in Pennsylvania, to cite just one state, of improperly sealed well casings.  Gas and any contaminants migrate.

The town of Dimock, Pennsylvania, is a frightening example of out-of-control contamination of water supplies.  This is a place with exploding water wells and polluted ground and drinking water.  See our December 2 post on “Marcellus Powerball.”  Link: http://www.spectraenergywatch.com/blog/?p=494

Frankly, the history of PCB contamination involving Spectra Energy compressor stations via its Texas Eastern pipeline division is staggering.  For additional background, see the November 18 post, “Spectra PCBs? (part one).  Link: http://www.spectraenergywatch.com/blog/?p=480

Today’s Texas Eastern pipeline is nearly 9,000 miles long with 73 compressor stations, according to the company’s 10-K filing with the SEC.

Don’t Eat the Fish

An internet search turns up several examples of citizens and/or regulatory agencies monitoring PCB concentrations that were disposed of in waste pits near compressor stations by Spectra Energy’s Texas Eastern pipeline division.

For example, the Mississippi Department of Environmental Quality (DEQ) has been testing for PCBs on two rivers in the Pearl River basin for roughly 20 years.

According to a DEQ technical report published in 2004:

“During the time that PCBs were in use at the compressor station [near Kosciusko and operated by Texas Eastern], PCBs were disposed of by placing the waste in pits which migrated to Conehoma Creek and the Yockanookany River.”  (Executive Summary, p. 4 of print document, p. 5 of pdf file)  Link:  pearlrbconehomayockpcbjan04

According to the Mississippi DEQ report, “Fish tissue samples from Conehoma Creek and the Yockanookany River have shown concentrations of PCBs elevated above safe levels for consumption.”  (Executive Summary, p. 4 of print document, p. 5 of pdf file)

A phone call to DEQ’s Office of Pollution Control verified that the fish consumption advisory continues to this day – warning citizens to limit their consumption of fish from areas on two rivers because of the continued presence of PCBs.

EPA ‘Celebrates’ Spectra Energy

Spectra Energy’s PCB contamination is singular in many ways, making public questions and monitoring more than appropriate.  For example, on the Environmental Protection Agency’s website, there is “A Look at EPA Accomplishments:  25 Years of Protecting Public Health and the Environment.”

Forty-four accomplishments are celebrated over a 25-year period – from the banning of DDT and phasing out lead in gasoline to the first community right-to-know law.

Within that lengthy list, only two companies are cited by name.  The first is Spectra Energy via its Texas Eastern pipeline division.  The citation for 1990 reads:

“EPA assesses a penalty of $15 million – the largest single civil penalty in the Agency’s history [at that time] – against Texas Eastern Gas Pipeline Company, for extensive PCB contamination at 89 sites.  In addition to the fine, the company is required to pay for PCB cleanups estimated to exceed $750 million.”

The only other company cited by name is Exxon, for its Exxon Valdez oil spill.  For reference, here is the link: http://www.epa.gov/history/topics/epa/25b.htm

The challenge for the gas industry and Spectra Energy is whether past performance is an indicator of current and future behavior.

Betting on the Marcellus Play:

Gas Royalties in Your Future?

How ‘Bout Clean Water?

Choose Wisely

Landowners and communities are raising questions about the problem and the opportunity of drilling the gas-rich Marcellus Shale.

The Marcellus Shale is generally described as a geological formation about 8,500 feet below the surface of the earth that runs through Pennsylvania, New York, West Virginia and Ohio.  Technology such as horizontal drilling and hydraulic fracturing now make it profitable to extract gas from this formation; and experts say there is a lot of gas there.

But while a multi-million dollar national advertising campaign by the energy industry touts natural gas as the clean burning fuel, the process for getting natural gas out of the ground is far from clean.

So folks are looking for advice:  To drill or not to drill … to lease or not to lease?  What can I expect from potential drilling activities on my property, if I decide to lease?

As one property owner said, a lot of people want to bet on the “Marcellus Powerball” and hope they win the lottery in the form of lucrative royalty payments from a gas lease.

But hope isn’t a strategy, and daydreams aren’t reality.  So landowners and public officials must educate themselves and choose wisely; because whatever decision you make, you will own the consequences – good or bad.

The Marcellus Shale with its hydraulic fracturing and chemical stew is a high-stakes game.  Never bet what you can’t afford to lose.  Like clean water, property value, health.

Educate Yourself & Talk to Your Neighbors

There are lots of information resources out there, but where do you look among industry, government and academic sources to name three.  Consider all of these but always ask yourself, “What is in this organization’s self interest?”

And listen to the voice of landowners who have been through the experience.

Here’s a quick look at two resources – academic and landowners who have been there, done that.

First, check out a report published this year on “the impact of Marcellus Shale gas extraction.”  It is an illustrated, easy-to-read tutorial on what to expect.

Titled, Hancock & The Marcellus Shale, the 40-page booklet was produced by a graduate seminar at Columbia University’s Urban Design Program in the Spring of 2009.  It is available as a downloadable pdf file: <http://www.osiny.org/custom/HancockAndTheMarcellusShale.pdf>

The title refers to Hancock, NY, a village near the northeast corner of the Pennsylvania border.

The report acknowledges that the opportunity to sign natural gas leases and receive royalty payments looks good to many property owners.  That money “would allow for mortgages to be paid off, children to go to college and lifelong dreams to be realized,” the document notes.  ["You Decide" - p. 34 of print document; p. 38 of pdf file]

It begins with a sobering assessment:  “Today, extracting natural gas from the Marcellus Shale … does not even receive the same level of review required by [the village of] Hancock [NY] for a single residential dwelling plan where local, State and Federal criteria must be met regarding well, septic and adjacent wetland.” ["Preface" - p. 1 of print document; p. 5 of pdf file]

Among the issues, according to the report:

1) How much water do you have – A single, typical horizontal well in the Marcellus Shale will require from 1.5 million to 9 million gallons of water during the 4-6 weeks of hydraulic fracturing that takes place.  ["Water Withdrawal," p. 10 of print document; p. 14 of pdf file]

2) One-third or more of that water becomes contaminated waste water – “Typically, 30 to 40% of the water used for drilling and fracturing returns to the surface highly contaminated.”  The contamination includes toxic fracking chemicals, metals, suspended solids, oil and grease.  ["Waste Water & Disposal," p. 10 of print document; p. 14 of pdf file]

According to the report – as some landowners already know – “gas companies will likely pump waste water into on-site pits to evaporate in the open air.  These pits are constructed with plastic liners, susceptible to punctures and often overflow during heavy rainfall.”  ["Waste Water & Disposal," p. 10 of print document; p. 14 of pdf file]

Dimock, PA – Landowners’ Nightmare

Coincidently, the report also devotes several pages to Dimock, PA, which is across the Delaware river and about 35 miles from Hancock, NY.  Dimock is a textbook example of what you don’t want to happen on your property or in your community.

A 23-page consent order filed November 4, 2009 by the Pennsylvania Department of Environmental Protection (DEP) cites Cabot Oil and Gas Corporation for “unlawful conduct” that includes:

• Exploding water wells
• Polluting fresh ground water and drinking water
• Improper and/or insufficient cement well casings which allow natural gas to migrate where it should not go (into homes and water wells)
• Discharge of drilling mud, an “industrial waste,” onto the ground or into the water

Among other actions, Cabot was ordered to:

• Provide the affected residents with “water in amounts sufficient to continually satisfy water usage needs until … [the DEP] has determined that the … Water Supply has been restored ….”
• Correct the improper well casings and cement in order to stop gas migration
• Civil penalty of $120,000 with the possibility of additional fines

Details and a copy of the DEP consent order can be found on the website of the Damascus Citizens for Sustainability (DCS), a grassroots group in Damascus, PA.  Link: http://www.damascuscitizens.org/aquifer-contaminated.html

Energy Companies & Marcellus

Energy companies are also betting on the Marcellus Powerball.

For example, Spectra Energy recently announced a “binding agreement” between its Texas Eastern pipeline division and Range Resources (“the leading Marcellus Shale producer”) to move Appalachian natural gas “to premium markets in the Northeast.”

Press Release Link: http://investors.spectraenergy.com/phoenix.zhtml?c=204494&p=irol-newsArticle&ID=1355645&highlight=

You can bet these companies act only in their own self interest – never mind the community relations platitudes gas companies love to use with landowners and public officials.

Test your water before they bring a single piece of equipment on your property.  Invest in an evaluation of your water that includes testing for any byproducts related to gas operations.  You’ll want proof of the baseline quality of your water, if it changes later.

One property owner told me that such a test cost him $900.  This is an important investment in your property and your health.  Any property with contaminated water is a nightmare scenario.  And don’t let the gas company do the testing for you.

Never Confuse a Business Acquaintance with a Friend

At the end of the day, if you decide to sign a drilling lease, remember this is a business transaction.  It is not about making a new friend who is going to give you money and leave your property in pristine condition.

Do not behave like white meat on the turkey because the gas companies and their landmen will pick you and your property clean.  Be as tough minded as they are (even behind their buttery smiles).

After all, they are not doing you any favors.  You own the key asset they covet. Make them earn it; and do everything you can to protect your property and your health.

Ask about (and investigate) the company’s track record, because they are going to be “living” on your property.  You want more information than what is in their glossy brochures.  Tell them to identify in writing their top three environmental and safety penalties in your state and nationally (including any that are under investigation where penalties have not yet been decided).

If they say they have none — make them put that in writing too.  Full disclosure is what you are after.

Make sure your lease is very specific about the protection of your property; about what the gas company can do on your property and what it cannot do; where it can operate equipment and where it cannot operate equipment.

Contact landowner groups through their websites (see “Links & Resources” below).  Download and read the report from Columbia University, Hancock & the Marcellus Shale.

Arm yourself with information so you are in a position to make the best decision on behalf of yourself, your family and your property.  Once you sign the lease, the time for any amendments or changes is over.

Links & Resources

Worth reading: Hancock & The Marcellus Shale, 40-page booklet from Columbia University’s Urban Design Program, published in the Spring of 2009.  Easy-to-read, illustrated report on what to expect.  Available as a downloadable pdf file: <http://www.osiny.org/custom/HancockAndTheMarcellusShale.pdf>

Damascus Citizens for Sustainability (DCS): The home page of an active and well organized grass roots group working to protect the upper Delaware Basin Watershed: http://www.damascuscitizens.org/index.html

Four steps to consider before signing a gas lease – based on a 1^st person radio interview on WHRW-FM, Binghamton University:http://www.spectraenergywatch.com/blog/?p=455

Industry Lobbying, Public Relations & Advertising:  IRS Disclosures Show Extent of Oil & Coal Groups’ Outreach (November 18, 2009).  The industry is telling its story, that’s why it’s important to listen to the voice of landowners.http://www.eenews.net/public/Greenwire/2009/11/18/1

Are Cancer-Causing PCBs Part of the Problem at Steckman Ridge?

Spectra Energy’s Amazing History with PCB Contamination:

Paid EPA $15 Million Penalty; Still #7 on EPA’s Top 21 List;

Subject of National News Coverage

Is it possible that Polychlorinated Biphenyls (PCBs) have contaminated Spectra Energy’s Steckman Ridge underground gas storage facility in Bedford County, Pennsylvania?

Sounds farfetched since Congress banned PCBs in 1979, correct?  Stayed tuned.

What Are PCBs?

PCBs are man-made chemicals, known as chlorinated hydrocarbons.  The U.S. Environmental Protection Agency (EPA) has concluded that PCBs cause cancer in animals and is a probable human carcinogen.¹ (See also “Links & References” below for a list of sources.)

Link:  http://www.epa.gov/epawaste/hazard/tsd/pcbs/pubs/about.htm

PCBs — Threat to Health

Regarding the “Health Effects” of PCBs, the EPA’s website notes (emphasis added):

“PCBs have been demonstrated to cause a variety of adverse health effects. PCBs have been shown to cause cancer in animals. PCBs have also been shown to cause a number of serious non-cancer health effects in animals, including effects on the immune system, reproductive system, nervous system, endocrine system and other health effects. Studies in humans provide supportive evidence for potential carcinogenic and non-carcinogenic effects of PCBs.” ²

Link:  http://www.epa.gov/epawaste/hazard/tsd/pcbs/pubs/effects.htm

Since Congress banned PCBs in 1979, how could it be a problem today?  As the EPA website notes (emphasis added):

PCBs Last a Lo-o-o-ng Time

“Once in the environment, PCBs do not readily break down and therefore may remain for long periods of time cycling between air, water, and soil.  PCBs can be carried long distances and have been found in snow and sea water in areas far away from where they were released into the environment. As a consequence, PCBs are found all over the world.  In general, the lighter the form of PCB, the further it can be transported from the source of contamination. PCBs can accumulate in the leaves and above-ground parts of plants and food crops. They are also taken up into the bodies of small organisms and fish. As a result, people who ingest fish may be exposed to PCBs that have bioaccumulated in the fish they are ingesting.” ³

Is it reasonable to ask whether PCBs are in the Steckman Ridge compressor station since it was installed approximately 30 years after the ban?

According to Toni Beck, Spectra Energy’s Group Vice President of Internal and External Affairs (emphasis added):

“We manage PCB contamination on our system in compliance with applicable EPA regulations, including the use of engineering controls and operational practices that prevent the migration of PCB contamination into uncontaminated pipeline segments or interconnects.”

What if the Steckman Ridge station is not a source but a conduit?  What if you have a contaminated pipeline system (i.e., Spectra Energy’s Texas Eastern system) connected to a new facility (Steckman Ridge)?  How long does it take to contaminate the new facility?  How would it be possible?

Staggering $15 Million Dollar Federal Penalty for PCBs

First, Spectra Energy’s Texas Eastern pipeline division is very familiar with PCBs. It has more than $15 million worth of experience with the toxic chemical.

Even today, Texas Eastern ranks number 7 on EPA’s hit parade of the 21 “Top Civil Penalty Cases of All Time.”  This list is known as the National Enforcement Trends (NETs) document and you can review it here: nets-top-civil-penalty-cases-w-texas-eastern1

The company’s PCB contamination was so bad and so extensive along its entire pipeline system that Texas Eastern, a division of Spectra Energy, agreed to pay a federal penalty of $15 million in 1987.  Said to be the “largest settlement of an EPA case in history” — at that time — it was a major story covered by national media outlets like The New York Times and TIME magazine.

For example, according to The New York Times (Nov. 10, 1987; emphasis added):

“The Texas Eastern Corporation tentatively agreed today to clean up PCBs and other toxic wastes disposed of at 89 sites in 14 states along its 10,000-mile natural gas pipeline.  The cleanup will cost an estimated $400 million. …  Texas Eastern will also pay penalties and costs of $15 million for violating regulations on the disposal of PCB’s, or polychlorinated biphenyls, along the pipeline. … The pipeline … stretches from Texas and Louisiana into the Northeast.”

Link:  http://www.nytimes.com/1987/11/10/us/pipeline-company-to-clean-pcb-sites.html

By the way, 19 of those sites are in Pennsylvania, according to a 1991 federal court ruling.⁴

Link: http://bulk.resource.org/courts.gov/c/F2/923/923.F2d.410.89-6307.html

According to a source knowledgeable about gas operations:  ”Long ago, PCB’s were used in the oils and greases at the compressor stations and valves on the pipeline and would get carried out of the station or valve by gas flow.  PCBs are no longer used, but they are extremely hard to get rid of once you get them into your system.  The only way to get rid of them is to completely replace an existing pipeline system with a 100% new system in the affected area.”

“This problem is bigger than it appears because we are talking about contaminated compressor stations, valves, and pipe from South Texas to the tip of the Northeast; and there are lots of compressor stations, valves, and pipe between these two points,” he continued.

“PCBs don’t discriminate and will move freely within the system and follow gas flow, which generally moves from South Texas to the Northeast.  They also have the option of reversing gas flow at the compressor stations and flowing in the other direction.”

“This is a big problem,” the source familiar with gas operations concluded.  ”It could be such a problem that testing for PCBs in South Texas could be nothing compared to the amount of PCBs in the Northeast.  One might even see an exponential increase of PCBs in the Northeast compared to South Texas.”

How Could PCBs Escape to the Environment?

The release of PCBs inside a pipeline or compressor station to the outside environment can happen in two ways, according to our source:  below ground or above ground.

1) Below Ground – The components of natural gas inside a pipeline can form a liquid; OR liquids are brought into the pipeline from a third-party interconnection; OR oils and greases are released from compressor stations, pipeline valves, or other processes.  It is the liquids and oils that pick up the PCBs; and if there is a release of liquid or oil from a contaminated system, it will contaminate the environment.  Gas migration underground is an issue that is receiving serious attention from geologists in Pennsylvania and elsewhere.  If gas and contaminated liquids and oils migrate out of the underground storage field reservoir, it can contaminate other nearby reservoirs and water aquifers.

2) Above Ground – These same contaminated liquids and oils can escape by opening the pipeline or compressor system when doing repairs or routine maintenance activities.  Automated shutdowns such as the emergency shutdown that occurred at the Steckman Ridge compressor station can release contaminated oils and liquids.

Solutions Not Gift Certificates

Finding answers is important.  Spectra Energy’s safety and environmental problems are piling up faster than the gift certificates it gives to area residents so they will “like” them.

Every month we learn more bad news about this company’s performance record over time — from a $15 million federal penalty for massive PCB contamination to a catastrophic failure that turned into an inferno at its Moss Bluff underground gas storage field.  Link to Moss Bluff Incident: http://www.spectraenergywatch.com/blog/?p=390

Meanwhile, there are persistent reports of contaminated water supplies in Bedford County and across Pennsylvania in connection with increased drilling and storage of gas in underground formations (through the use of injection wells).

It may or may not be fair, but a reasonable finger of suspicion points to the gas industry.  Bad water is a nightmare no property owner wants to face.  And where family farms are concerned, contamination threatens the destruction of income and property value.  Worse, none of the industry experts has a clue so far.

Instead of answers and transparency, property owners get gift certificates and promises.

Yet the activity goes on.

Every Drilling Mud & Frack Component It Could Use

In its pre-filing draft for the Steckman Ridge project (6-29-07), Spectra Energy told the Federal Energy Regulatory Commission (FERC) that the site would have 23 “storage wells.”

To date, Spectra Energy has converted five of the existing production wells, and drilled 8 new wells – for a current operating total of 13 injection/withdrawal wells, according to FERC.  Presumably, the company will drill 10 additional wells for a total of 23.

In addition, Spectra Energy filed for the record, on April 7, 2008, nearly 300 pages of Material Safety Data Sheets (MSDS) for every drilling mud and hydraulic fracturing component it could possibly use. spectra-report-to-ferc-4-7-08-fracking-drilling-chemicals1

Most of the data sheets are from Halliburton; and several of the chemical compounds are listed as cancer causing or probably carcinogenic, including chemicals with such trade names as Aquagel®, Baracarb® (a family of compounds), Baroid®, N-Seal^TM, Halliburton Gel, Oriskany Flush Cement, and Frack Sand.

It is time for Spectra Energy to engage in a grown-up conversation with its neighbors.  Not, why don’t you like us; or why do you keep picking on us?

Instead, send in the adults and answer questions:  What chemicals are you using?  Is the pipeline contaminated with PCBs or other toxic compounds?  How many property owners are having water problems you haven’t disclosed?  Fully disclose the risk factors involved in this underground gas storage operation.  How often do you test for hazardous chemicals and what are the results?  Have you fracked, or when are you going to frack (or use alternative stimulation)?

In our next blog, we will continue to pursue the issue of PCBs and related health and safety factors in natural gas operations.

Links & Resources

^{1,  3} EPA’s Basic Information on PCBs:  http://www.epa.gov/epawaste/hazard/tsd/pcbs/pubs/about.htm

² EPA’s “Health Effects of PCBs”:  http://www.epa.gov/epawaste/hazard/tsd/pcbs/pubs/effects.htm

⁴ Federal Court Ruling — 1991; see Section 1, “Facts And Proceedings Below” (emphasis added):

“The facts in this case are undisputed. Texas Eastern operates an interstate natural gas pipeline system that extends over 9,600 miles through 16 states from Texas to New York. The pipeline system passes through Pennsylvania. In 1985 or 1986, the EPA learned that Texas Eastern was allowing polychlorinated biphenyls (PCBs) to escape into the environment at 89 sites in 14 states along the pipeline system. Nineteen of these sites were in Pennsylvania. Accordingly, the EPA commenced an investigation and entered into discussions with Texas Eastern concerning appropriate responses to the contamination.” http://bulk.resource.org/courts.gov/c/F2/923/923.F2d.410.89-6307.html

Background:  The 1991 federal court action (referenced above) was triggered when Pennsylvania Department of Environmental Protection (DEP) apparently appealed in federal court (U.S. Court of Appeals, 5th Circuit) for the right to intervene in EPA action against Texas Eastern (a Division of Spectra Energy).  It appears that the DEP was concerned that the $15 million consent decree with the EPA might preempt state environmental laws.  The federal judge ruled that, “the consent decree itself should have no preemptive effect on state laws and that any preemption of state environmental laws would result from existing federal statutes or regulations that are not affected by the disposition of this action.”

EPA PCB Inspection Manual (August 2004) Page 2 (G-1): “PCBs pipeline liquids were illegally disposed of in unlined earthen pits, vented to the atmosphere and surface soils at various equipment blowdowns, used as herbicides on station fence-lines, and used for dust control on roads.  Examples of past cases/settlements involving the use of PCBs in turbine compressors include the Texas Eastern Gas Pipeline Company [division of Spectra Energy] and Transwestern Pipeline Company.”  (See link below next citation.)

Page 4 (G-3): “The 1981 CMP [EPA's Compliance Monitoring Program for PCBs] did not grant immunity to any of the participating companies from enforcement if violations were discovered.  The 1981 CMP has not prevented EPA from taking judicial or administrative enforcement actions against participating companies such as Texas Eastern Gas Pipeline Company [division of Spectra Energy] ….  Several states have also taken enforcement actions against companies participating in the CMP.”  http://www.epa.gov/compliance/resources/publications/monitoring/tsca/manuals/pcbinspect/pcbinspectappg.pdf

Views of Steckman Ridge Compressor Complex near Clearville in Bedford County, PA.  (Click on image to enlarge.)

Steckman Ridge nearly 5,000 HP compressor & nearby home, Bedford County, PA

Steckman Ridge underground gas storage complex (part of it) -- lots of pipe and other equipment sitting on top of a 12 billion cubic feet underground gas storage field.

Spectra Energy’s Response to DEP’s Notice of Violation:

Promises to do what it should have done by law, next time;

5 Recommendations for Penalties

Spectra Energy promises to follow the law the next time there is an emergency at its huge Steckman Ridge underground gas storage field, located in Bedford County, PA.

The company’s recent “unlawful conduct” violated air quality and clean stream regulations of the Pennsylvania Code, according to the Pennsylvania Department of Environmental Protection (DEP).

The DEP issued a “Notice of Violation” to the Houston-based company on September 16.  It required Spectra Energy to respond in 15 days with “a detailed summary of the events that caused the malfunction, emissions and reporting failures as well as Steckman Ridge’s plan to prevent future occurrences.”  [Emphasis added.]  [See pdf file below under "Links & References.]

Spectra Energy’s October 2 two-page response to the DEP offered what could be viewed as a surprise plan to avoid future “reporting failures.”  It offered a “new reporting procedure” in the event of another emergency at its Steckman Ridge underground gas storage field. [See pdf file below under "Links & References.]

The crux of its plan appears based on a promise to follow the law next time!  On August 23, when the nearly 5,000 horsepower compressor station shut down following a gas leak:

• Pennsylvania Code already requires companies to report emergencies to the DEP by telephone within two hours of an incident.  Spectra Energy failed to do that, but now promises it will follow the law next time.

• Pennsylvania Code already requires companies to follow up with a written report of the incident to DEP within three days.  Spectra Energy failed to do that, but now promises it will follow the law next time.

In a curious (next-to-the-last) paragraph in its report to DEP, the company wrote [emphasis added]:

“In addition to the above [technical steps], we have implemented a new reporting procedure for any future emergency shutdowns to address malfunction reporting issues.  The procedure requires immediate reporting to PA DEP by telephone of all emergency shutdown gas releases, regardless of any associated oil release.  A written report of such instances of malfunctions will be submitted to PA DEP within three days of the incident.”

Essentially, the company’s “new reporting procedure” boils down to a promise to follow the law next time.  With all due respect to the executive team responsible for this $5 billion company, one wonders how much time was spent around the legal and environmental conference table in order to brainstorm such “a new reporting procedure.”

With homage to Mad Magazine’s “Scenes We’d Like to See”

Picture little Johnny Steckman excitedly waving his hand in the air.  “I’ve got it, I’ve got it,” he burbles.  “How ‘bout if we tell ‘em next time we’ll follow the law – but we call it a New Reporting Procedure?”

Next, regarding Spectra Energy’s plan “to minimize the potential for a recurrence” of the emergency shutdown, the company identifies five engineering or mechanical steps it has taken.  (See page two of the “Steckman Ridge” response in the pdf file below.)

A source familiar with gas operations offered this blog the following comments, based on reviewing the Spectra Energy report and his own experience in the field.  He has not visited the Steckman Ridge storage field.

He speculates, for example, that more was involved in the emergency shutdown than a “cracked pipe fitting.”

“I believe the root cause of the compressor station shutdown and release of natural gas, oil and liquid into the atmosphere was due to liquid shutting down the system — an overload slug of liquids/oil from those wells.  In other words, they got a big slug of liquid at the compressor and it automatically shut down to prevent damage.  Then the station piping blew down, and all the liquids that were in the piping vented to the atmosphere.

“The Spectra Energy report contains several references to actions designed to minimize the amount of liquid in the station piping, and ‘to remove oil from the piping.’  This suggests that liquids were to blame.

“The company said it is evaluating installation of an additional filter separator to aid in removal of liquids from the gas stream.

“In addition, here is an excerpt from, followed by a link to, a Department of Transportation (DOT) inspection form which mentions ‘slugs of liquids’ and the need for automatic liquid removal, compressor shutdown, or high liquid level alarm to combat the slugs.”

The excerpt reads:

Do liquid separators have a manual drain and if slugs of liquid could be carried into the compressor, automatic liquid removal, compressor shutdown, or high liquid level alarm?

Are liquid separators manufactured in accordance with Section VIII of the ASME Boiler and Pressure Vessel Code or a design factor less than or equal to 0.4 if constructed of pipe and fittings with no internal welding?

Link to DOT inspection form:

http://www.phmsa.dot.gov/staticfiles/PHMSA/DownloadableFiles/Files/PHMSA_Form_5_2009.pdf

[See page 4 of the DOT inspection form, under the subhead ‘Design Requirements,' Section .165(b)]:

1 Million Cubic feet of Natural Gas, But Only 20 Gallons of Liquid?

The Notice of Violation was issued to Spectra Energy on September 16 following the company’s poor safety and environmental response surrounding the August 23 emergency shutdown of its nearly 5,000 horsepower compressor station.

In its October 2 response to DEP, the company reported that 967,000 standard cubic feet of natural gas was released into the atmosphere, along with what it estimates was about 20 gallons of oil which showered onto surrounding properties.

Our source, who is familiar with gas operations, raises questions with the estimate that only 20 gallons was released into the atmosphere.  He believes it could have been much higher, perhaps as much as 100 gallons of liquid and oil.

He notes:  “The company’s estimate is based on a review of oil usage, but that is insufficient to conclude that only 20 gallons was released and compressor/motor oil was the only component.  It is likely that all the liquids and natural gas in the piping system were vented to the atmosphere.

Currently the DEP is in the important penalty assessment phase, as it evaluates the company’s response regarding its “unlawful conduct.”

Risky Premise

Some reports are circulating that, because the emergency shutdown did not result in catastrophic failure, it is safe to return to business as usual with, perhaps, a modest fine and a slap on the wrist to Spectra Energy.

It is nice to be lucky, but that should not determine DEP’s penalty assessment.  Spectra Energy demonstrated the equivalent of what strikes many area residents as reckless indifference – and/or reckless incompetence.  (For details, read “Emergency Shutdown” at this link): http://www.spectraenergywatch.com/blog/?p=372

This is the company that promises:  “Safety of the residents and the environment is our primary priority.”  Instead, their performance in the midst of an “emergency shutdown” due to a gas leak in a huge compressor station sitting on top of a 12 billion cubic feet underground gas storage field is a dramatic failure.

Please – No Rerun of 2004 Moss Bluff Incident

In addition, this company did experience a catastrophic failure in 2004 at its Moss Bluff gas storage field outside of Houston.  This involved two explosions, six days of fire with flames as high as 1,000 feet and two evacuations.

Spectra Energy has declined to share what it learned from that experience in order to demonstrate that it provides improved performance at its Steckman Ridge field.  (For details, read “Moss Bluff Incident” at this link): http://www.spectraenergywatch.com/blog/?p=390

Its “new reporting procedure” with its commitment to follow the law next time suggests that Spectra Energy still does not get it.

What if we’re not lucky next time?  It is always in the public interest to take a tough stand on behalf of safety and the environment.

The Steckman Ridge station is approximately three miles from an elementary school.

And there is a bonus here for Spectra Energy.  It could demonstrate tangible commitment to the safety of residents and the environment.  This could mark a new phase in its community relations that go far beyond handing out gift certificates.

Following are recommendations for DEP to consider in its evaluation.

5 Penalty Recommendations

1)    Consideration of a fine should start at $100,000 and only move up.

2)    One-year probation of the facility with unannounced inspections and visits.

3)    DEP to staff one of its engineers at the site – with all compensation and other expenses to be paid by Spectra Energy for this person.  The DEP staffer would remain on site for one year, then the DEP could decide whether to extend its presence there, based on Spectra Energy performance and quality improvement.

4) A full-time site manager to be assigned to Steckman Ridge.  This person must be an employee of Spectra Energy (FTE, versus a contract person).  This person must be on site at the Steckman Ridge facility and be the responsible leader at that site.

5) Keep the Steckman Ridge compressor station fully staffed until the liquid  problem is resolved and additional equipment is installed and proven effective.

We want Spectra Energy to be a responsible member of our community – to be the best it can be in that regard.  Keep the gift certificates.  Make sure that our environment is safe and clean; and that our families and properties are safe.

LINKS & REFERENCES

Spectra Energy Response to DEP’s Notice of Violation: steckman-ridge-response-ltr

DEP’s Notice of Violation to Spectra Energy: dep-violation-notice-p1 dep-violation-notice-p2

Pennsylvania Code Citations

25 PA Code Citations:

http://www.pacode.com/secure/data/025/articleICIII_toc.html

91.33. Incidents causing or threatening pollution:

http://www.pacode.com/secure/data/025/chapter91/s91.33.html

Air Pollution Control Act:

http://www.dep.state.pa.us/DEP/DEPUTATE/airwaste/aq/regs/apca.pdf

Clean Streams Law:

http://www.dep.state.pa.us/dep/deputate/minres/oilgas/CSLawuc.htm

Spectra Energy, Eminent Domain, Water Pollution

Making News on WHRW-FM Radio at Binghamton University

(Part of State University of New York – SUNY – System);

Internet Access Spreads 1^st Person Accounts

1)    Are you dealing with property rights issues related to the threat of eminent domain from energy or utility companies that want your property for gas pipelines, underground gas storage fields or other uses?

2)    Are gas drillers asking you to sign leases because your property sits above the gas-rich Marcellus Shale?

3)    Are you wondering about increasing reports of water contamination that may be related to gas drilling operations?

Thanks to internet technology, you have an opportunity to listen to a first-person conversation with property owners who are sharing their experience and recommendations of how to deal with these issues.

Houston-based Spectra Energy Corporation’s performance record at its underground gas storage field in Bedford County, PA (dubbed Steckman Ridge), was front and center in a talk radio program hosted by Vince Fronda and called The Point.

The program airs every Tuesday between 10:00 am – 1:00 pm on WHRW radio 90.5 on the FM dial.  The best part is that you can listen to it online via your computer.  (See links provided in this post.)

Mike Benard, Bedford County property owner who launched this website, was asked to talk about eminent domain, which is the forced “taking” of property and/or property rights under the badge of government.

Benard spoke in detail about the experience he and other property owners shared in a two-year fight against eminent domain actions launched by Spectra Energy, a natural gas storage and pipeline company, backed by the power of the Federal Energy Regulatory Commission (FERC).

Mike Benard Interview on WHRW:

http://www.radio4all.net/files/vfronda@gmail.com/4028-1-mike_benard_interview.mp3

By clicking the audio file link above, you can listen to that broadcast.  Among other topics, Benard talks about what property owners can do if faced with losing their property rights under the threat of eminent domain.

For property owners who might be approached by gas companies that want to drill on their property, he recommended four steps before signing any lease:

1)    If water is on your property, have it tested before any drilling activity begins. Get your water tested for any byproducts related to gas operations, because you will want proof of the baseline quality of your water, if it changes later.  One property owner spent $900 for such comprehensive tests.

2)    Do your homework. For example, understand comparable value in lease agreements.  If the gas companies are also leasing public lands (e.g., game lands or state forest lands), ask to see a copy of that lease agreement.  Gas companies will be reluctant to share that information because the lease agreements with government entities tend to be much better than the lease agreements with private property owners.

3)    Use available resources. In addition to this website, check out a website called the “Natural Gas Lease Forum for Landowners” at this link:  http://pagaslease.com/index.php

4)    Get competent legal advice before signing any lease. It makes sense to find an attorney who specializes in mineral rights, but don’t be surprised to learn that they also work for energy companies.  It is your job to weed out any potential conflict of interest by asking questions.

Following the interview with Mike Benard, Angel and Wayne Smith called in to continue the discussion.  The Smith’s are very familiar with Spectra Energy and gas operations as they are among the property owners in Bedford County, PA.

Angel & Wayne Smith Interview on WHRW:

http://www.radio4all.net/files/vfronda@gmail.com/4028-2-angel_and_wayne_smith_interview.mp3

Mr. and Mrs. Smith recently sued Spectra Energy for an alleged illegal taking of their property rights for the company’s Steckman Ridge underground gas storage field.  In addition, their legal action contends that the Houston-based company is responsible for the contamination of their water supply, via its Steckman Ridge joint venture.

The Smith’s lawsuit was the subject of a front-page article in the Bedford Gazette (October 24-25).  Among other details, the article reported:  “The Smith’s arsenic levels [in their water] became so serious that they purchased a complex $11,000 treatment system they now keep in their basement.”

It is easy for some folks to theorize about issues like eminent domain and the contamination of a water supply – especially when they have no skin in the game.  Angel and Wayne Smith put a human face on the reality of these issues.  Their experience offers important lessons for property owners.

In addition to the WHRW-FM broadcast, you can find out more at these links:

Clearville’s Blog: http://clearville.wordpress.com/

Clearville Compressor Station: http://www.youtube.com/watch?v=Goq21cuNQkg&feature=channel

Spectra Energy Lobbying $ Puts It in Top 10%

of Oil & Gas Industry Spenders at Federal Level

Spectra Energy spent more than two million dollars lobbying the federal government over the last 2 1/2 years.  This is according to lobbying disclosure reports available online from The Center for Responsive Politics.  (Links are found at the bottom of this post.)

Separate from that, Spectra Energy spent nearly one-quarter million dollars lobbying in Pennsylvania in less than 1 1/2 years, according online data available from the Pennsylvania Department of State.  (Links below.)

PA Politics & Energy Industry

Pennsylvania politics is a big money play for the oil and natural gas industry, which contributed nearly one million dollars to Pennsylvania politicians in 2008-2009, according to a news report in The Times-Tribune (Scranton, PA) by Robert Swift, its Harrisburg Bureau Chief (Oct. 18, 2009).

Link: http://www.thetimes-tribune.com/news/special_interests_spared_from_state_budget_cuts

Or pdf file: special-interests-spared-from-state-budget-cuts-news-the-times-tribune

In addition, as the Philadelphia Inquirer reported (October 7), the deputy chief of staff for Governor Rendell stepped down to join Range Resources Corporation as VP of government relations and regulatory affairs for the Texas-based company that has “a major drilling stake in Pennsylvania,” according to the Inquirer.

There has long been a revolving door between government and the energy industry.  Public servants who become lobbyists move from representing the public interest to representing the self interest of the energy industry.  Companies like Spectra Energy are focused on protecting its self interest on issues such as:  tax, the environment, and “clean air and water” (which doesn’t necessarily mean that citizens will get clean air and water).

Money Talks

The Times-Tribune headline says it all:  “Special interests spared from state budget cuts.”  Bureau Chief Robert Swift reports that:

“While taking their knives to programs covering everything from the environment to economic development and the arts, Pennsylvania legislators protected some special interests in the new $27.8 billion budget.

“They declined to tax natural gas drillers, while opening more state forest land to them.”

The two million lobbying dollars that Spectra Energy spent at the federal level break down as follows:

Year                                           Spectra Energy’s Total Lobbying Expenditures

2009 (Partial Year)                                                   $448,997

2008                                                                        $865,981

2007                                                                        $776,450

TOTAL                                                                  $2.09 million

Roughly half of the $2 million spent on federal lobbying went to two professional lobbying firms in Washington:  Daryl Owen Associates and Van Scoyoc Associates, according to data provided online by The Center for Responsive Politics.

Spectra Energy:  Top 10% of Spenders

This puts Spectra Energy in the top 10% of oil and gas industry spenders in 2008, if my arithmetic is correct.  The Center for Responsive Politics lists 195 companies and organizations in its profile of the oil and gas industry (e.g., Exxon Mobil, Chesapeake Energy, American Petroleum Institute).

At number 17 on the spending hit parade, Spectra Energy outspent 178 other companies and organizations in the industry last year.

Meanwhile, back in Pennsylvania, Spectra Energy was busy spending money via its Spectra Energy Transmission, LLC.  As noted, the company spent nearly one-quarter million dollars lobbying in Pennsylvania in less than 1 1/2 years, according online data available from the Pennsylvania Department of State.

Here is the breakdown for its Pennsylvania state lobbying dollars:

Year                           Spectra Energy’s PA Lobbying Expenditures

2009 (Partial Year)                                                   $105,000

2008   (3 quarters of the year)                                 $140,357

TOTAL                                                                      $245,357

Its Pennsylvania lobbying firm is Tri State Strategies PA, L.L.C.  Considering that Spectra Energy opened an office in Pittsburgh, that amount will likely increase.

In the company press release (June 29), Bob Riga, general manager of Northeast marketing for Spectra Energy Transmission and the one in charge of the new Pittsburgh office is quoted as saying (emphasis added):  “And, given our years of experience and existing footprint, we’re able to expand responsibly, managing costs and minimizing impacts to landowners, communities and the environment.”

Spectra Energy’s Worrisome Track Record

Property owners who have dealt with Spectra Energy know that the company’s “existing footprint” is worrisome given its poor track record to date.  And the notion of “minimizing impacts to landowners, communities and the environment” is a platitude, not an operating principle.

For specific details on its poor track record where public safety and the environment is concerned, read about the “Emergency Shutdown” at its huge compressor station in Bedford County, PA.  Spectra Energy’s lackadaisical response earned it a Notice of Violation from the Pennsylvania Department of Environmental Protection.  Click on the link: http://www.spectraenergywatch.com/blog/?p=372

Fortunately, lots of citizens and grass/netroots activists are telling legislators in Harrisburg, Washington and elsewhere that companies like Spectra Energy must be closely monitored and held to the highest standards of safety and environmental performance.

But the governing class needs to hear your voice too.  For three easy references, check out the following links:

Legislative Alert: http://www.spectraenergywatch.com/blog/?p=399

Legislator on Property Rights: http://www.spectraenergywatch.com/blog/?p=311

Government Directory: http://www.spectraenergywatch.com/blog/?page_id=8

Link to Federal Lobbying Info:

Here is the link for The Center for Responsive Politics that takes you to Spectra Energy’s 2008 federal lobbying expenditures.  From here, you can navigate to examine 2007 and 2009 (partial year) expenditures, plus you can click on the Oil & Gas Industry profile for that year:

http://www.opensecrets.org/lobby/clientsum.php?lname=Spectra+Energy&year=2008

Link to PA State Lobbying Info:

For ease of use, here is a pdf file of the Pennsylvania lobbying expenses for Spectra Energy: pa-lobbying-exp-for-spectra

But if you like to noodle around on the internet, first go to the Pennsylvania Department of State home page: http://www.dos.state.pa.us/dos/site/default.asp

Look at the links down the left hand side of the page and click on “Lobbying Disclosure” this will take you here: http://www.dos.state.pa.us/campaignfinance/cwp/view.asp?a=1337&Q=447471&campaignfinanceNav=|&dosNav=|

Then click on “Registration/Report Search” near the top left of the page and that will take you here -

https://www.palobbyingservices.state.pa.us/Act134/Default.aspx

Then click on “Search” near the top left of the page and that will take you to “Registration Quick Search” -

https://www.palobbyingservices.state.pa.us/Act134/Public/EnhancedSearch.aspx

Under that first paragraph at the top of the page, there are five categories to choose from.  Choose “Expenses” and use the form.  Spectra Energy’s lobbying registration number is P09041.  On the form that opens, you can fill in the name of the company, or the registration number, or both.

Link to Spectra Energy Press Release regarding Pittsburgh Office:

http://investors.spectraenergy.com/phoenix.zhtml?c=204494&p=irol-newsArticle&ID=1303134&highlight=

Spectra Energy’s Underground Gas Storage Field

Reduces Property Value in Bedford County, PA;

County Board of Assessment Should Consider Impact of Eminent Domain, Public Safety & Environmental Issues;

Threat from Underground Gas Leaks in PA

Subject of November Geologists’ Workshop in Pittsburgh

As Bedford County property owners know well, county officials launched the first property assessment to revise property tax valuations since 1957. As part of that, a company known as Tyler Technologies was reportedly paid nearly $2 million in taxpayer dollars to do on-site inspections of properties in order to set current values.

Our experience and that of every property owner I’ve talked with indicates that Tyler Technologies’ assessment forms are replete with errors. The formal appeal process is now filling meeting rooms at the Bedford County Commissioners’ offices on South Juliana Street.

Citizens who appeal are asked to sign a waiver because Pennsylvania law requires the board to issue a decision on each appeal within five days – which will be impossible, given the overwhelming number of appeals.

Part of our formal appeal is that Spectra Energy’s 12 billion cubic feet underground gas storage field – called Steckman Ridge – negatively impacts property values of those landowners who are on top of, or near, the Steckman Ridge field.

There are two primary reasons for this:

Eminent domain & the storage field reduces property owner rights & the use they can make of their own property

Public safety & environmental risks

Steckman Ridge Reduces Property Rights & Value

Many properties in the Clearville area (perhaps as many as 150 or more) now sit on top of, or near, a huge 12 billion cubic feet underground gas storage field. To do this, property rights were seized by Houston-based Spectra Energy under the threat of eminent domain, given to it by the Federal Energy Regulatory Commission (FERC). It is dubbed the Steckman Ridge project.

The seizure of property rights under the threat of eminent domain and the presence of this underground storage field with its pipelines and huge compressor station restricts the use that property owners can make of their own land.

For example, area property owners who possess mineral rights once enjoyed an annuity stream from royalties paid by Pennsylvania General Energy for the extraction of natural gas from the Oriskany formation.

Once Spectra Energy, under the badge of FERC, seized these property rights for its storage field, the possibility of further potential recovery from other formations (including but not limited to the Marcellus Shale) is virtually eliminated.

In fact, Spectra Energy filed motions with a federal judge in Johnstown that, in the event of a jury trial over just compensation, property owners should not be permitted to even argue lost economic value related to any potential recovery of native gas from the Marcellus Shale or other formations. Nor should they be permitted to question Spectra Energy or any of its expert witnesses on the subject.

In addition, buildings cannot be erected nor can trees be planted over right-of-way areas (e.g., pipelines). In some cases access is denied. All of this reduces economic value to the property owner.

Furthermore, property owners were not compensated in the same manner as Spectra Energy’s March 11, 2009 lease agreement with the Pennsylvania Game Commission for the neighboring game lands (#49, Tract 49A-01). Perhaps Spectra Energy can explain why “just compensation” for the state government is different than the “just compensation” it typically offers private property owners.

Threats to Public Safety & the Environment Reduce Property Value

Spectra Energy had a real-life opportunity to demonstrate its commitment to public safety and rapid response during an unexpected emergency shutdown on August 23. For details, see our blog post at this link: http://www.spectraenergywatch.com/blog/?p=372

The emergency shutdown occurred when the nearly 5,000 horsepower compressor sitting on top of the 12 billion cubic feet underground gas storage field shut down due to a gas leak. There was a blow off of natural gas and a spray of contaminant on neighboring homes and properties.

Spectra Energy’s operational response was so bad that the Pennsylvania Department of Environmental Protection (DEP) issued a “Notice of Violation” on September 16 to the company for its problematic response. To view a pdf copy of the DEP notice, click here:                   dep-violation-notice-p1 dep-violation-notice-p2

Spectra Energy’s Response to a Public Emergency

• It took three days for the company to officially notify residents of the incident and ask them not to eat their vegetables until the contaminant could be tested.
• Two days after the emergency, the company still had not contacted the Pennsylvania Department of Environmental Protection (DEP), or the Bedford Emergency Response. In fact, DEP contacted Spectra Energy first, after hearing from property owners.
• Spectra Energy had trouble finding the contaminant. First, they say they did not realize it had spread off site. Second, they told one property owner that she wasn’t hit, then later admitted her property had been hit by the contaminant and couldn’t explain why they didn’t identify it, according to a neighboring property owner.

None of this behavior is a reassuring benchmark for safety or operational excellence.

Finally, the reported air emissions for Spectra Energy in 2008 is measured in tons, according to DEP records. These emissions include: nitrogen oxides, volatile organic compounds, carbon monoxide and formaldehyde, among other pollutants. Here is the DEP link: http://www.ahs2.dep.state.pa.us/eFACTSWeb/searchResults_singleFacility.aspx?FacilityID=466924

Threat from Underground Gas Leaks in PA

As more folks are learning, gas migration can potentially cause serious problems to communities and property owners.

A recent article published in Environmental Science & Technology (© 2009 American Chemical Society), and written by Rebecca Renner, looks specifically at the issue in Pennsylvania. Following are two excerpts from that article which is dated Sept. 2, 2009 (Emphasis added):

“Natural-gas leaks are relatively common in Pennsylvania, which employs a full-time geologist to investigate such incidents. In recent years, some of these leaks have had devastating consequences, including home explosions and fatalities, according to an investigation by ProPublica, Inc., an independent nonprofit newsroom. Leaks are mainly a legacy of the state’s fossil fuel drilling and mining history; however, leaks from operating wells have caused explosions and even fatalities.

“Tracing the leaks is difficult, because sources include gas wells, natural-gas storage fields, pipelines, coal mines, and landfills – all of which can be either active or abandoned. Bacterial degradation of organic matter also produces methane. Stable-isotope analysis is an essential tool for identifying the source, according to Pennsylvania Department of Environmental Protection (PA DEP) geologist Fred Baldassare, who investigates stray gas leaks.”

Article pdf file: spate-of-gas-drilling-leaks-raises-marcellus-concerns-environmental-science-technology-acs-publications

 

The issue is serious enough to merit a two-day Stray Gas Workshop in Pittsburgh, November 4-6, 2009. Fred Baldassare, geologist for the Pennsylvania Department of Environmental Protection (PA DEP), will be a speaker.

The conference is co-sponsored by the U.S. Geological Survey and the Pittsburgh Geological Society, with the collaboration of the federal Office of Surface Mining Reclamation and Enforcement and the PA DEP.  Website: http://pa.water.usgs.gov/stray_gas/

In Summary

The presence of a huge underground natural gas storage field subtracts from property values because of limitations on property rights, as well as demonstrated public safety and environmental threats. This should be recognized in the assessment of properties that are impacted by the presence of this storage field.

In addition, companies engaged in such operations, such as Spectra Energy, should be closely monitored and held to the highest standards of safety. The threat of migrating gas underground also needs to be understood so it can be addressed.

Photos of Steckman Ridge Compressor Station Complex — “looks like a small city,” according to one Clearville, PA, property owner.  First photo shows a view of compressor station and nearby residence.  Welcome to the Neighborhood Watch Group, Spectra Energy.  [Click on photos to enlarge.]

Property Owners Contact PA Legislators:

New Budget Proposal Threatens More State Lands for Gas Drillers;

Raids Oil & Gas Lease Fund, Stripping DCNR of Funding;

Instead, Pass Severance Tax on Extraction of Gas

“Our voices will not be muffled by the loud ring of the moneyed natural gas companies,” is the battle cry of Eileen Juico, member of the Chester County Pipeline Task Force. Chester County, Pennsylvania, is the site of extensive natural gas pipeline activity.

Revolving Door Between Government & Energy Industry

Her battle cry is to the point as the Philadelphia Inquirer reports (October 7) that the deputy chief of staff for Governor Rendell is stepping down to join Range Resources Corporation as VP of government relations and regulatory affairs for the Texas-based company that has “a major drilling stake in Pennsylvania,” according to the Inquirer.

In the meantime, Ms. Juico and Task Force members are mobilizing property owners to contact key members of the Pennsylvania House and Senate to urge them to oppose a budget amendment that would permit leasing additional state forest lands for gas drilling.

At the same time, this proposal would raid Pennsylvania’s Oil & Gas Lease fund, effectively stripping the Department of Conservation and Natural Resources (DCNR) of funding to manage and upgrade Pennsylvania’s parks and forests.

Currently, more than 600,000 acres of state forest land are already available for leasing, according to Ms. Juico. This particular budget proposal would require the Department of Conservation and Natural Resources (DCNR) to lease an additional 200,000 acres for natural gas drilling. It is seen as one way to boost state revenue in order to help reduce Pennsylvania’s huge budget deficits.

Task Force Recommendations

Ms. Juico, however, notes both fiscal and environmental concerns. “The amount of revenue raised from additional leasing will not generate significant funding for the budget, but it runs the risk of exposing the Commonwealth and its citizens to substantial environmental costs,” she added.

In her view, such leasing is in direct conflict with the mission of DCNR “to conserve and sustain Pennsylvania’s natural resources.”

Even more troubling, this budget proposal would eliminate the Oil and Gas Lease Fund, stripping DCNR of funding to manage and sustain Pennsylvania’s parks and forests. Instead, lease revenues would go directly and permanently to the General Fund (where it could more easily be spent on all manner of government pork projects).

Legislators who oppose this proposal recall Pennsylvania’s history with coal.

For example, House Game and Fisheries Committee Chairman Ed Staback, D-Lackawanna/Wayne, said in a press release last month (emphasis added):

“Living in the Northeast, every day I see the remnants of the rush to get natural resources out of the ground. Without ironclad guarantees for reclaiming efforts and expenses coming from the gas companies, our state forests could be left with dangerous holes dotting the land, retaining ponds full of polluted water, and abandoned sheds, buildings and well structures.”

Ms. Juico advocates an alternative budget proposal she believes is more fiscally and environmentally responsible.

“We support a severance tax on natural gas drilling. In other words, tax the extraction of natural gas.”

“Pennsylvania Senate Bill 997 would institute a severance tax on natural gas drilling and earmark a portion of those revenues for local governments directly impacted by the Marcellus Shale gas drilling and the construction of natural gas pipelines,” she said.

Instead of leasing more state forest lands to gas drilling operations and stripping the DCNR of funding to do its job, she points out that a severance tax is a better alternative.

“A severance tax on the extraction of natural gas is a customary start-up cost for natural gas companies throughout this nation,” she said. “It will not deter these companies from seeking the lucrative profits that the Marcellus Shale offers.”

What Property Owners Know

In Pennsylvania, among other states, energy companies are becoming more active due to the potential of profitable recovery of natural gas from the Marcellus Shale.

Growing emphasis on natural gas means more underground storage fields, more pipelines and more eminent domain actions that involve the seizure of private property rights. Meanwhile, incidents of water pollution are surfacing across the state in connection with increased drilling and storage of gas in underground formations (through the use of injection wells).

Property owners who have experienced any of these issues know three things:

Gas migrates underground which can create unexpected problems.

Toxic chemicals are used in drilling or injection (storage) operations.

The revolving door between government and the energy industry (e.g., Governor Rendell’s deputy chief of staff joining Range Resources) underscores the fact that citizens and landowners must act as an industry/government watch group to ensure that the public interest is represented and protected.

Call to Action

To that purpose, Ms. Juico urges landowners to contact key legislators immediately and urge them to:

Oppose forcing the DCNR to lease additional state forest land for gas drilling (and raiding the Oil & Gas Lease Fund).

Instead, support a severance or extraction tax on the recovery of natural gas that would include revenues for local governments impacted by natural gas drilling and the construction of pipelines.

In addition to your own local state legislators, here are three critical contacts to make:

Senator Dominic Pileggi, Pennsylvania Senate Majority Leader

Harrisburg Office: 717-787-4712

Toll free: 888-984-3478.

E-mail: dpileggi@pasen.gov

Senator Jake Corman, Chair of Appropriations Committee

Harrisburg Office: 717-787-1377

Senator Joe Scarnati, Lieutenant Governor & President Pro Tempore of the Pennsylvania Senate

Harrisburg Office: 717-787-7084

Spectra Energy’s 2004 Catastrophic Failure at Texas Storage Field:

Two Explosions; 6 bcf of natural gas burns for 6 1/2 Days;

Flames 1,000 feet high; Two Evacuations

Spectra Energy: “Don’t … Believe Your Blog Is An Appropriate Forum … To Engage in Specific Discussion of Our Operating Procedures…”

Blog Offers 3 Recommendations to Improve

Spectra Energy’s Credibility & Operational Excellence

Spectra Energy specializes in pipelines and underground natural gas storage fields. It owns or co-owns about eight underground storage fields in the U.S. and Canada – plus two liquefied natural gas storage facilities.

This includes the 12 billion cubic feet Steckman Ridge storage field in Clearville, Bedford County, Pennsylvania.

This storage field exists because the company seized property rights under the badge of the Federal Energy Regulatory Commission (FERC). During that process, Spectra Energy filed 11 separate civil actions against Bedford County property owners in the United States District Court for the Western District of Pennsylvania (Johnstown, Pa).

On February 27, 2009, Judge Kim R. Gibson granted Spectra Energy the right to begin injecting gas into the Steckman Ridge storage field.

Spectra Energy opened an office in Pittsburgh and signaled it will expand operations in Pennsylvania.

In the company press release for that event (June 29), Bob Riga, general manager of Northeast marketing for Spectra Energy Transmission and the one in charge of the new Pittsburgh office is quoted as saying (emphasis added): “And, given our years of experience and existing footprint, we’re able to expand responsibly, managing costs and minimizing impacts to landowners, communities and the environment.”

Moss Bluff Incident

That confident attitude apparently does not extend to even a brief discussion of lessons learned from the 2004 incident at its Moss Bluff underground storage facility about 40 miles outside of Houston, Texas.

This was a catastrophic event that involved two explosions, a fire that burned for 6 1/2 days sending flames as high as 1,000 feet, as 6 billion cubic feet of natural gas burned off in an uncontrolled release.  Fortunately, there were no injuries; but there were two separate evacuations — 30 families in a one-mile radius followed by an evacuation of 100 people from a three-mile radius.

According to evaluations of the incident, there was a well casing separation in the salt cavern which allowed storage gas to enter above-ground brine piping.  In addition, there was no down-hole shut-off valve.

There are a number of treatments of the Moss Bluff incident.  The above references come from an article that is part of a special publication of the Geological Society, London.  The article is by Brent Miyazaki and it is titled, “Well integrity:  An overlooked source of risk and liability for underground natural gas storage.  Lessons learned from incidents in the USA.” The copyright on the article/publication is 2009. (See links & references below.)

It is important to note that every situation is different, of course — this was a salt cavern storage facility and Steckman Ridge is not.  And while the possibility of such catastrophic failure may be low, it is not zero.

Given the presence of its huge, 12 billion cubic feet underground natural gas storage facility in Clearville, PA, one might think that Spectra Energy is ready for any question.

Safety & Environment – Primary Priority?

After all, this is the company that told Clearville property owners in an August 26 notice signed by Michael Baehr, Senior Right of Way Representative for the Steckman Ridge Area Office: “Safety of the residents and the environment is our primary priority.”

This notice came after what the company said was an “emergency shutdown” of a nearly 5,000 horsepower compressor station due to a gas leak. The compressor station sits atop the 12 billion cubic feet underground natural gas storage field. (For details and background, see Sept. 8 blog on the emergency at this link): http://www.spectraenergywatch.com/blog/?p=372

Given Spectra Energy’s operational experience and ownership of pipelines and storage fields, I asked the company two questions:

1. Can you share with me a short list of key lessons the company has learned from its experience with the 2004 incident at the Moss Bluff storage field in Texas where a fire burned for 6 1/2 days as 6 billion cubic feet of natural gas escaped and burned?
2. Would it be impossible today for that kind of hazard to occur at Steckman Ridge, and why?

The complete reply from Toni Beck, Spectra Energy’s Group Vice President of Internal and External Affairs, is as follows:

“We’re always working to improve our practices and procedures and certainly learn from incidents when we have them. Steckman Ridge and Moss Bluff are very different facilities. We don’t, however, believe your blog is an appropriate forum for us to engage in a specific discussion of our operating procedures and facility design.

“Our focus on being a safe operator has always been, and continues to be, our highest priority and our operating procedures reflect that focus.”

Residents and property owners had an opportunity to watch Spectra Energy’s “focus on being a safe operator” following the company’s response to what it identified as an emergency shutdown of its nearly 5,000 horsepower compressor and the resulting contaminant overspray on nearby properties on August 23.

In other words, one test of operational readiness is how Spectra Energy responded in what they, themselves, describe as an emergency shutdown.

• It took three days for the company to officially notify residents of the incident and ask them not to eat their vegetables until the contaminant could be tested.
• Two days after the emergency, the company still had not contacted the Pennsylvania Department of Environmental Protection (DEP). In fact, DEP contacted Spectra Energy first after talking to property owners.
• Spectra Energy reps apparently had trouble finding the contaminant. First, they say they did not realize it had spread off site.  Second, they told one property owner that she wasn’t hit, then later admitted her property had been hit by the contaminant and couldn’t explain why they didn’t identify it, according to a neighboring property owner.

The company’s lack of a rapid response and outreach is worrisome. It does not inspire confidence in folks who officially assert:  ”Safety of the residents and the environment is our primary priority.”

Accountability

If this were merely a drill, perhaps the discussion could be focused on improvement opportunities – and more drills.  But this was not a drill; it was a real-life emergency shutdown.  As residents know, this facility is approximately 3 miles from an elementary school (Mann-Monroe).

Does anybody at Spectra Energy own skin-in-the-game responsibility for this feeble performance? Is this the best citizens can expect from the company that calls itself “North America’s premier natural gas infrastructure company?”

Keep in mind that this is a company that submitted to FERC 9 pages of a “Stakeholder Contact List” in its June 29, 2007 “Pre-Filing Draft” to the federal agency. Nine pages listing federal, state (including DEP), and Bedford County officials. Did the company forget, ignore or lose its “contact list?”

Over the past two years, the lessons for landowners who must deal with Spectra Energy are consistent:

• There is a disconnect between its stated principles and its actions.

In its latest emergency, did Spectra Energy demonstrate by its actions that “Safety of the residents and the environment is our primary priority?” Not at all. Its lackluster response was pathetic – and could prove dangerous.

• Spectra Energy sees itself as the aggrieved party.

Like an adolescent, Spectra Energy is focused on itself. Spectra Energy personnel – from VPs to right-of-way agents – continue to ask landowners: Why do you keep coming after us? Why do you beat up on us? Spectra Energy’s corporate culture confuses superficial courtesies with accountability and an adult commitment to do the right thing.

Listen to Clearville property owner George Kuhne, as reported in the Bedford Gazette (August 29 & 30, 2009):

“We don’t have any particular bias against Steckman Ridge, George added. “Our frustration with the whole process has been, from our perspective, Steckman Ridge has never admitted to anything unless there was evidence to the contrary.

“You’re not told anything. To find anything out, you really have to push for it because no one is giving out information unless you force them to,” George said.

“Butter Job”

In our website video, Clearville landowner Dick Eckman has a wonderful expression for it: butter job. Spectra Energy is good at giving butter jobs to people and it’s easier than living up to those high-minded principles it brandishes on its website and in letters to landowners and regulatory agencies.

3 Recommendations

But we’re not here to merely criticize, though we hope this “tough love” feedback is constructive. We want Spectra Energy to be the best it can be in terms of a neighbor. Given its performance to date, this cannot happen without an adult conversation. Following are three recommendations to improve its credibility and operational excellence:

Spectra Energy must hold someone publicly responsible for the lack of a rapid response and outreach to residents, regulatory agencies and the Bedford County Emergency Response.

Consistent with corporate quality methodology, Spectra Energy should deliver a public improvement plan to support rapid response to emergency situations at Steckman Ridge. This is not a “conversation” or another “promise.” This is a written plan and commitment. Among other points, what will the company do differently and who will be accountable? As part of that, it will be vital to identify a responsible person who is on deck in Clearville – but choose wisely!

Spectra Energy must share key lessons learned from such catastrophic failures as Moss Bluff. The purpose here is not to “beat up” on Spectra Energy (as some of its right-of-way agents whine), but to inspire confidence in the company’s ability to learn from such incidents and to apply those learnings to improved safety for communities. And, yes, we understand Moss Bluff and Steckman Ridge have differences as underground storage fields, but there are also similarities. Tell us what you’ve learned.

As the sign says at the state border: Welcome to Pennsylvania.

LINKS & REFERENCES

“Well integrity:  An overlooked source of risk and liability for underground natural gas storage.  Lessons learned from incidents in the USA,” by Brent Miyazaki. His article is part of a special publication of the Geological Society, London (© The Geological Society of London 2009).  An abstract of the article is available online at the link shown. There is a cost of $30 to access the complete article for one day; but you can download a pdf of the 10-page article for printing out and reading (which I did). Miyazaki lists 33 references at the end of his article.

Link to free abstract: http://sp.lyellcollection.org/cgi/gca?gca=313%2F1%2F163&sendit=Get+All+Checked+Abstract%28s%29

Industrial Fire World Magazine (IFW): “What Lies Beneath” – article on Moss Bluff incident posted November/December 2004.  Six photos are on the right side of the page when it opens; click on the photos and they will enlarge slightly.

Link: http://www.fireworld.com/ifw_articles/mossbluff1.php

Spectra Energy Press Release on new Pittsburgh Office:

http://investors.spectraenergy.com/phoenix.zhtml?c=204494&p=irol-newsArticle&ID=1303134&highlight

Steckman Ridge Storage Project Stakeholder Contact List – Pre-Filing Draft and Stakeholder Contact List filed with the Federal Energy Regulatory Commission on June 29, 2007. See the last 9 pages at the end of the document, or pdf pages 60-68.

Click on PDF file: ferc-pre-filing-draft-6-29-07

Gas Leak Shuts Down Steckman Ridge Compressor Station

Sitting on Top of Huge Underground Natural Gas Storage Field;

Contaminant Sprayed Over Homes, Animals, Water

Spectra Energy Takes 3 Days To Officially Notify Residents;

Was Pennsylvania DEP Notified as Required by Law?

DEP Says it is Investigating

A large compressor sitting on top of a 12 billion cubic feet underground natural gas storage field in Clearville, PA, went into emergency shutdown on a quiet Sunday afternoon with a noise that “sounded like a jet aircraft coming in for a crash landing,” according to Clearville property owner Dick Eckman.

An alarm sounded for approximately 20-30 minutes, according to Julie Kuhne, whose Clearville property, among others, was showered with a contaminant described as “oily mist” while her four children were in the yard.

Company officials say a natural gas leak caused the shutdown.

The Pennsylvania Department of Environmental Protection (DEP) is currently investigating whether Spectra Energy complied with the legal reporting requirement within the required time frame, according to Michael Ruddeck, Air Quality District Supervisor for DEP in the Altoona office.

Emergency Shutdown

According to a report filed with the National Response Center (NRC), a crack in a 1-inch diameter nipple caused a natural gas leak that triggered the emergency shut down. The NRC is part of the federal government and is the “sole national point of contact for reporting all … discharges into the environment anywhere in the United States and its territories.” (See links, references & photos below.)

The NRC report also notes that: “Expected clean up to private property may exceed $50,000.”

The emergency shutdown “vented all natural gas within the facility to the atmosphere as a safety precaution,” said Michael Baehr, Senior Right of Way Representative for the Steckman Ridge Area Office, in a notice given to residents three days later.

A two-page memo labeled “FINAL – 8-26-09,” that accompanied Mr. Baehr’s notice states: “Safety of the residents and the environment is our primary priority.”

According to Clearville property owner George Kuhne, however, “It has been obvious to us that the overall strategy for the incident on Spectra’s part is to downplay and deny.”

Did Not Communicate Quickly Enough

Spectra Energy acknowledges that, “We did not communicate with residents quickly enough,” according to Toni Beck, Group Vice President of Internal and External Affairs.

Three days passed before Houston-based Spectra Energy communicated with residents telling them not to eat vegetables from their gardens. The emergency shutdown and shower of contaminant on nearby properties occurred on Sunday afternoon (August 23). Property owners did not hear anything from Spectra Energy representatives until Wednesday evening (August 26). Some residents were not contacted until the following day (August 27).

In a three-page notice distributed to residents, the company advised: “We’re recommending that any edible vegetables or fruits that have been in contact with the oil not be eaten.” The memo does not specifically address drinking water, though it does say, “We’re also checking the water bodies and gardens in the area.”

Julie Kuhne spotted the yellow/orange substance with the consistency of oil as soon as she stepped out of her back door on the afternoon of the incident. It was all over her property, she said, visible on the stone slate at the door, the driveway and vehicles.

But Spectra Energy initially had difficulty spotting the contaminant.

Ms. Beck, the Spectra Energy Group Vice President of Internal and External Affairs, said the company initially believed “the trail of oil mist … ended within our compressor station property.” She added, “We assumed – incorrectly – that it had not traveled off our property and therefore did not impact any of the nearby residents.”

Two Spectra Energy representatives told Mrs. Kuhne they didn’t see any contaminant on her neighbor’s property when they inspected it on Wednesday afternoon (August 26), three days after the emergency shutdown; and after Mrs. Kuhne showed them the substance on her property.

The two representatives who inspected the property were Mike Baehr, Senior Right of Way Representative, who is based in Chambersburg; and Kevin McCrary, a contract landman for Spectra Energy who lives in Bedford County.

According to Mrs. Kuhne, when she questioned how the Spectra Energy representatives could have missed the contaminant on her neighbor’s property after seeing it on her own, Mr. Baehr replied that he didn’t know, but they were focused on the pond there. Mr. McCrary told her, “We didn’t go there not to find anything.”

PA DEP Investigating

Mr. Ruddeck, the DEP Air Quality Supervisor, explained to this blog that the Steckman Ridge Compressor Station “operates under an issued Air Quality Plan Approval.”

That Air Quality Plan requires the company to report malfunctions to the DEP in a timely manner.

“Malfunctions which pose an imminent danger to public health, safety, welfare and the environment shall be immediately reported to the DEP by telephone no later than 2 hours after the incident occurs. A written report of the malfunction shall be submitted to the DEP within three days of the telephone report,” according to Mr. Ruddeck.

Spectra Energy did not submit a written notification of the malfunction until five days after the incident (August 28).

Ms. Beck, the Spectra Energy VP, told this blog that, “we were in conversation with the PADEP within approximately 48 hours of the release of the oil mist.”  It would appear, however, that the reason they were “in conversation with PADEP” at that point is because the DEP contacted Spectra Energy first on Tuesday afternoon (August 25).

The DEP’s Mr. Ruddeck told this blog (emphasis added):

“Although Steckman Ridge personnel were aware of the facility shutdown at the time of its occurrence they apparently were unaware of the oil mist release off property or the scope of the release until they were contacted by the DEP on Tuesday afternoon 8/25/09.”

Contaminant & Water Testing to Date

Spectra Energy collected samples of the oily contaminant and Ms. Beck reported: “The laboratory report (performed by a third party, Analytical Laboratory Services, Inc.) states that the sample has a carbon range typical of various motor and lubricating oils. Furthermore, a toxicological review (performed by a third party, Center for Toxicology and Environmental Health) of the laboratory data and the Material Safety Data Sheets (MSDS) indicates lubricating oil has a low toxicity to humans, even if swallowed.”

DEP took its own samples of the contaminant on August 26 and told Mrs. Kuhne that test results will take 2-3 weeks. Five days later (August 31), another rep from DEP came out to take a water sample. A third rep is scheduled to come and run a different set of water tests to evaluate whether it contains by products of natural gas or oil.

Spectra Energy also took a baseline water test on August 28 before they began cleanup of the Kuhne property. They told the Kuhnes that the water was safe to drink.

Steckman Ridge Compressor Station

The Steckman Ridge compressor station is located four miles southeast of Clearville, PA, on Rock Hill Church Road. It and the 12 billion cubic feet underground natural gas storage field were the center of a two-year fight over the seizure of private property rights by Houston-based Spectra Energy Corporation, with the backing of the Federal Energy Regulatory Commission (FERC) that approved the project and gave Spectra Energy the power of eminent domain.

The Spectra Energy Watch blog emerged from that fight for property rights.

The compressor station houses one 4,735 horsepower reciprocating compressor, according to Ms. Beck, Spectra Energy’s Group VP of Internal and External Affairs.

This unit includes a 16-cylinder, natural-gas powered engine that drives a 6-cylinder gas compressor used to support injection and withdrawal of natural gas into the underground storage field (located in the Oriskany formation) by boosting pressure when and where necessary.

LINKS, REFERENCES & PHOTOS

NATIONAL RESPONSE CENTER — Go to this federal government website to view the incident report:  http://www.nrc.uscg.mil/foia.html Click on “Query Standard Reports.”   When the next page comes up, the second field reads, “NRC Report Number.”  Type in 916122.  It may be a bit slow, but that should take you to the incident report.  In the event you have difficulty, here is a pdf file you can open by clicking on:  nrc-steckman-ridge-report-8-09

SPECTRA ENERGY’S OFFICIAL NOTIFICATION TO RESIDENTS — 3 Days after incident; click on image to enlarge.

Cover letter for Spectra Energy

Spectra Energy p. 2

Spectra Energy p. 3

PROPERTY PHOTOS — Click on photos to enlarge.

Front windshield area of van after it had been washed the day before, still showing persistant contaminant spray marks. Kuhne property, Clearville, PA

Battery cover showing contaminant spray. Kuhne property, Clearville, PA.

Educate Yourself & Talk to Neighbors

“Send lawyers, guns and money

Dad, get me out of this, ha”

Lyrics by Warren Zevon, Lawyers, Guns & Money

This conversation will focus on using the power of numbers to strengthen your position and review the upside and the downside of group dynamics.

Dual Perspective

As noted in Part 1, my experience includes a transformative two-year eminent domain fight with Houston-based Spectra Energy, backed by the power of the Federal Energy Regulatory Commission. This website was motivated by that event; and it focuses specifically on property rights that come under pressure from energy and utility companies.

Matt Jarrell is a Shareholder and Director at Sherrard German & Kelly, P.C., a law firm headquartered in Pittsburgh, PA. Matt is a member of his firm’s Financial Services, Corporate and Litigation Groups. In addition, he counsels energy companies involved in the transmission and distribution of oil and gas. This includes exploration and production companies. Matt served as our attorney during our two-year fight with Spectra Energy over property rights in Bedford County, associated with the Steckman Ridge Project.

Matt’s experience is in the court of law. My experience is in the court of public opinion. For example, I held the top communications job at Kodak as VP and Director of Communications & Public Affairs for more than a dozen years before retiring in 2006.

Property Owner Mike Benard: David Soete, Senior Resource Specialist at the Upper Delaware Council, recalls the advice a wise farmer gave a group of landowners at a seminar:

“The biggest fear of the natural gas companies is that you will educate yourself and talk to your neighbors.”

Paul Stup, a Clearville, PA, property owner and a former vice president of the Bedford County Farm Bureau, points out:

“In my dealings with FERC (Federal Energy Regulatory Commission) I’ve always had the feeling that the less I knew, the better off they were.”

So educate yourself rather than depend on the kindness of strangers from the energy companies and government. Pay attention to the procedural deadlines and participate, whether it is with the Federal Energy Regulatory Commission (FERC) or with the Township Commission. Remember, the energy companies will be diligent about filing deadlines.

For example, if yours is a FERC project, register on the FERC website so you can follow the docket and its timeline. File your own comments because you will want your position on any proposed “taking” of property rights on the record.

Talk to Neighbors & Create Allies

As soon as possible in the process, begin contacting and organizing other property owners who are impacted by the same project. Negotiate and bargain as a group. This is the last thing in the world energy companies want.  They prefer compliant and solo property owners so they can pick you off one-by-one. Use the power of the group to raise your voice and tell your story by contacting other property rights activists, legislators, news media, and public policy groups.

Our fight with Spectra Energy (dubbed the Steckman Ridge Project) led to the development of this website which focuses specifically on property rights that come under pressure from energy and utility companies.  We are now helping and responding to inquiries from property owners in Pennsylvania, Texas, Oklahoma, Massachusetts and elsewhere.

In addition, we have the distinction of being told by a Spectra Energy VP that he has never seen this level of property owner resistance in 26 years with the gas industry.

Share Ideas & Talent

The value of a group is not only a united front that challenges the energy industry. There is also value in shared ideas and a division of labor that comes with group dynamics.

Find out what skills are possessed by various neighbors. Someone who is a member of a state farm bureau or an environmental organization may have grassroots lobbying and network experience. Others may be internet wizards who can do deep dives into research on the energy companies and the issue. Some groups in other Pennsylvania counties have lawyers among their property owners. Take advantage of the experience and talent in your community.

To increase the power of your voice, hold community meetings and informational workshops to spread the word. Even in today’s economy, most people are property owners and property accounts for much of their economic wealth.  In other words, it is in their self interest to pay attention and get involved because the energy or utility industry project will impact their property value.

In Pennsylvania, just to cite one state, energy companies are becoming more active. Spectra Energy, for example, opened an office in Pittsburgh; and the company is active in York County among other locations. Property rights issues and battles are going to be with us for a long time.

Regarding group dynamics, remember the 80/20 rule:  In any organization, 20% of the members will do 80% of the work.  So keep the group going and don’t get discouraged. You will have an impact on the energy industry.

Regarding legislators — remember that eminent domain only functions under the power or badge of government. In our case, a staffer for one congressman was quoted as telling a reporter (emphasis added): “It’s an important project, but it is a private agreement between a business concern and residents, and the congressman generally does not enter into those things.”

Private agreement? Good grief. Eminent domain can only happen under the badge of government. If you hear that from a legislator, you have a teachable moment to educate him or her. If this were a private matter, you could break off “negotiations” and your life would be simpler. But you can’t do that because the energy company has been given the power of eminent domain over your property rights by the government.

On the other hand, seek out and support legislators who “get it” where property rights issues are concerned. Here are two examples of legislators working to level the playing field for property owners.

PA House Bill 1817

Pennsylvania state government representative Curt Schroder (R – East Brandywine) has introduced legislation with the support of seven cosponsors (Democrats and Republicans) “that will provide regional control over the placement of natural gas pipelines in communities across Pennsylvania.” In other words, Pennsylvania House Bill 1817 challenges the FERC monopoly on these kinds of decisions. Here is a link for more information: http://www.spectraenergywatch.com/blog/?p=311

Federal House Bill H.R. 1921

Congressman Jim Gerlach (PA – R, 6th District) is working across the aisle in Washington with Joe Sestak (PA – D, 7^th District) to pass a bill that would create an Office of Public Advocate inside the Department of Justice to represent the interest of property owners at FERC. Refer to H.R. 1921.

Gas Industry Culture

Lawyer Matt Jarrell: The gas business, especially in the Appalachian Basin, is as old as dirt. The gas pipeline business is heavily regulated, both in how a business operates and in how much money it can make. Put those two things together and it is not hard to see how some corporate cultures might come to be perceived over time as rigid and formulaic – like a battleship.

People in charge of areas within these battleships can get used to rigidity and even get comfortable with it. Since the processes big pipeline companies use to achieve their business goals are often large scale and controlled by regulatory mandate, there is less need for adaptability in many contexts. If a situation arises where the company needs to adapt on the fly, you sometimes find out just how hard it can be to turn a battleship.

When landowners throw up meaningful roadblocks to a company’s land acquisition strategy, it stresses the system; and the rigidity of some corporate cultures can make change very difficult. In that context, the Benards (who are my clients) represented a one-in-a-million event. They were not fighting for economic gain; and the energy industry is not used to dealing with folks who will fight on principle and invest to locate and obtain the tools to do so effectively even if there is no economic gain.

I cannot understate what that kind of informed tenacity can achieve on behalf of the larger battle for property rights. But it is important to understand that their willingness to fight what they believe to be a basic inequity was matched by the tenacity of their desire to educate themselves about the economic, legal, technical and business issues involved in the case. Only by understanding those issues could the Benards effectively advocate for themselves.

Generally, there is strength in numbers where “numbers” equate to large chunks of land and where the owners of those properties educate themselves and negotiate wisely. The bigger the chunk of land, the greater the bargaining power of landowners, in part, because the potential downside to a company from a landowner friendly court decision on the issue of just compensation is greater.

A company will try to make deals with individual landowners in order to diminish the bargaining power of the others. It is therefore beneficial to make sure all landowners are informed and educated. Information sessions and workshops can be useful, but can have a negative effect if the information conveyed is either flawed or not communicated effectively. Pooled funds can be used to retain experts or consultants to offer opinions on property value that provides ammunition in negotiations.

While there can be strength in numbers, be sensitive to whether the group’s efforts are presenting a solid, single-block negotiating team or whether negative group dynamics are eroding progress to reach an agreement. Many, if not most, attorneys will advise you to consider striking your own deal if you sense that the group is actually hurting its own cause and you are not in a position to stop it from doing so.

3 Options on Legal Fees

As a general rule, you have three options regarding legal fees and the representation that comes with them. The three options are:

1. Flat fee – a set fee for a pre-determined amount of work. Expenses and expert witness fees are above that.
2. Contingency fee – percentages vary, but it is common for an attorney to take one-third of the final award or settlement (though the percentage can be higher or lower). Expenses and expert witness fees are above that.
3. Hourly billings — $200/ per hour or higher; expenses and expert witness fees are above that.

The method of payment is not necessarily an indicator of how well an attorney will perform. You simply must do due diligence on any attorney you or the group might want to retain. As you do, keep in mind the following:

1. The landowner might be happy to know exactly what the attorney will cost.But, an attorney working on a flat fee has little economic incentive to perform beyond the minimum after he receives all or most of the fee.
2. An attorney paid on a contingency basis theoretically will be motivated to do a good job because his “take” will be a share of what he negotiates or wins from the gas company. Sometimes, this translates to a focus on keeping costs down and not spending significant time learning about, and working on, the case in order to develop the strongest arguments available. The expectation being that, as the case grinds along, the energy company will increase its offer to an amount acceptable to the landowner; and enough to justify the attorney’s time on the matter.
3. Attorneys who require monthly payments based on time spent most likely will be expensive, particularly where complicated issues such as underground gas reservoirs or storage rights might be involved that require considerable review and, in some cases, efforts to create new legal arguments. And there is no guarantee that the attorney paid on an hourly fee basis will outperform any other attorney.

You need to make the decision that is best for you; but you also need to be aware of what financial implications are involved.

Not the Lottery

When it is all said and done, do not expect to feel as though you won the lottery. While huge lease bonuses and royalty rates have been observed in the natural gas world over the last few years, these generally are tied to efforts to drill wells and produce what is referred to as native gas reserves.

Those higher financial numbers do not generally apply to situations where a gas company wants a strip of surface land in order to lay a pipeline, or the right to take certain geologic strata deep within the earth in order to create an underground natural gas storage field that has been approved by a regulatory agency like the Federal Energy Regulatory Commission (FERC).

The dry-as-bones legal issue in eminent domain cases is what is being taken and what is it worth? Fifty-foot-wide strips of land in the woods might mean very much to the owner of the property, but the real issue is going to be how an appraiser calculates the fair market value of that fifty-foot-wide strip, usually based on comparable sales of similar land in similar areas.

Often the fair market value of the property being taken (whether it is a fifty-foot strip in the woods, or a section of earth thousands of feet below the surface) will not reflect the grief and inconvenience to the landowner of losing his ability to use that property, let alone the trying, strained, and costly times in negotiation and litigation.

With this in mind, you should educate yourself on the issues and develop an understanding of what you think your property is worth as soon as possible. While the launch of eminent domain court actions is not the end of the world or your ability to negotiate, it does mean that the company, the party with greater resources, gains leverage because litigation marches on, whether the parties want it to or not. And from that point on, you must measure your resolve not just in what you think you should get paid, but also in what you are willing to pay to get it.