BRADFORD COUNTY, Pennsylvania In what may be the most drilled county in the Northeast, the only land that, as of May, had not been leased to energy companies to explore for shale gas in Bradford County, Pennsylvania, is beneath graves.
The rush to produce natural gas in the Marcellus Shale, as exemplified in this tiny county's mounting car wrecks and 'shaleonaires'--farmers collecting millions in mineral rights' royalties--has produced a well-documented battle with producers over the environmental impact of the chemicals used to help extract the hydrocarbons.
An equally vexing, if less controversial, battle now looms, however: ensuring enough pipelines are built, quickly enough, to funnel the gas into the deep Northeast market.
Thus far, gas producers like Range Resources and Chesapeake Energy have been fortunate, with ample pipeline capacity for the amount of gas flowing out of the area.
As broader public opinion turns increasingly hostile toward the fracking industry, getting land rights and regulatory approvals necessary to build the estimated 100 plus miles of new lines and procuring land for associated infrastructure that will be needed becomes harder and harder.
That challenge has not yet slowed investment; but it could soon, and could prove as great a risk to expansion as the state and federal crack-down on fracking.
"Pipeline right of way has always been an issue for pipes and nothing has changed," said Sam Andrus, director of North American gas market modeling with consultancy IHS-CERA. "It's particularly difficult in highly populated areas so trying to get through New Jersey and into Manhattan is more difficult than in West Texas."
The region's inadequate infrastructure is readily apparent in prices, which often spike during peak winter demand, because producers are not always able to get their gas to market.
In the last two-and-a-half years, prices have fetched as much as $20 to $38 per million British thermal units on Williams Cos' Transcontinental Zone 6 line, in New York. The average price is around $6.50 per mmBtu.
The flood of gas released from the technique known as hydraulic fracturing, or "fracking," shale rock has flattened gas prices for consumers. It has also surprised Wall Street with the ease at which producers have been able to send the gas to market, especially after a couple of accidents in Bradford County that polluted some water supplies and threatened harsh reaction from local governments.
"The market shows it's fairly confident that the pipeline capacity is being built in line with the way production is coming on-stream," said Biliana Pehlivanova, a natural gas analyst with Barclays Capital in New York.
"The market was expecting to see a lot more constraints in the Marcellus than we actually have seen," he said.
Three major gas pipelines outline Bradford's perimeter -- Williams Transcontinental, El Paso Corp's Tennessee Gas Pipeline, and to the north the Millennium Pipeline owned by units of NiSource Inc., National Grid and DTE Energy -- each with their own expansion project in the works to meet the expected production increase.
Pipeline and storage company Inergy expects a decision from the federal government in July or September as to whether it can build a pipeline, partially through Bradford, that would connect it to the three major lines.
Still, pipeline right-of-ways are likely to be swept into the looming regulatory battle over permitting wells, drilling and water treatment.
The Federal Energy Regulatory Commission, if it comes down to it, can always employ eminent domain to lay pipelines, if getting gas to market is deemed in the greater public interest, analysts say.
In a letter to the Pennsylvania state governor, the state Department of Environmental Protection Secretary Michael Krancer has suggested not to renew or amend any permits of gas companies who do not comply with changes to the state's Oil and Gas Act, also suggested by Krancer in the same letter. The governor will present his recommendations for regulating the natural gas industry on July 22.
"We are moving, in general, toward a more strictly regulated natural gas industry, because of the increased focus and publicity we've had on natural gas production and operations. And certainly, the incidents we've had with pipelines and production facilities have contributed to that," Pehlivanova said.
When it goes smoothly, natural gas is extracted in shale by drilling two wells. The first is drilled vertically; the drill is then snaked sideways, thousands of feet underground to prepare the horizontal layers of rock underneath to be cracked.
A kind of perforating gun is inserted into the horizontal portion of the well to emit a nonexplosive charge to crack the rock.
A mix of millions of gallons of water, sand and chemicals is flushed at high pressure through the well. The water keeps the sand mobile and the sand keeps the fissures in the rock open, allowing the rock to release the gas captured between the dense shale layers and the deposits to float to the surface.