Tuesday, October 29th, 2013 @ 4:07PM

Hydraulic Fracturing Largely Driving Transformation of the Nation’s Landscape

The Wall Street Journal
Photo: Benjamin Rasmussen for The Wall Street Journal

Over the summer, something sprang up in the view from Dorsey Johnson’s back deck north of Denver, where she watches sunsets over Colorado’s front range. It was a noisy, towering rig, drilling a new oil well. “There was clanking. There were trucks going by,” she says. All she wanted was for the rig to go away.

Across the U.S., new oil and gas wells have turned millions of people into the petroleum industry’s neighbors. For many, the oil and gas companies are welcome newcomers bearing checks. Others consider the new arrivals loud, smelly and disruptive. The drilling boom is firing up resentment in some communities when one person’s financial windfall means their neighbors abut a working well.

The Wall Street Journal analyzed well location and census data for more than 700 counties in 11 major energy-producing states. At least 15.3 million Americans lived within a mile of a well that has been drilled since 2000. That is more people than live in Michigan or New York City.

The arrival of the Oil Patch in the nation’s backyards is a result of an extraordinary U.S. energy boom driven largely by hydraulic fracturing, or fracking, a practice that makes it possible to tap into dense, previously impenetrable shale formations to extract fossil fuels. Fracking enabled the drilling of the Niobrara Shale in Colorado, as well as the Marcellus Shale in Pennsylvania, the Barnett Shale in Texas and others.

Neighborhood Wells

More than 15 million Americans live within a mile of a well that has been drilled and fracked since 2000. Explore development in 11 key states.

The change can be dramatic. In Johnson County, Texas, in 2000, there were fewer than 20 oil and gas wells. Only a fraction of the residents of this mostly suburban county, south of Fort Worth, lived anywhere near a well or could tell you where to find one.

Today, more than 3,900 wells dot the county and some 99.5% of its 150,000 residents live within a mile of a well. Similar transformations took place in parts of Pennsylvania, Colorado and Wyoming, according to Journal data.

Nationwide some 23 counties, with more than four million residents, each had more than three new wells per square mile, according to the 2010 Census and well-location information from DrillingInfo, a data provider to the oil industry. Comparisons to well density in earlier eras is difficult, due to incomplete records from a century’s worth of drilling.

Fracking gave a boost to an ailing national economy. The U.S. is awash in inexpensive natural gas, lowering electricity costs and home heating bills. Crude oil production is at a 22-year high and oil imports are at their lowest level since 1996, and falling. The energy boom has stirred dreams the U.S. could end its reliance on foreign oil, though that remains a long way off.

But the energy isn’t coming from a small number of immense wells in some distant oil field. It is coming from hundreds of thousands of small wells that now blanket entire counties.

As a result, parts of the U.S. face unprecedented industrialization. Each well requires earth-moving machinery to create a flat 1- or 2-acre pad of compressed earth. Then, a 10-story rig is assembled to drill a hole up to 10,000 feet deep.

After that, the well is fracked, creating thousands of tiny cracks in the rock to free the oil or gas. That entails heavy equipment: truck-sized containers of water and sand, mixers, stadium lighting, pumps, chemical storage and injection vans and recreational-vehicle command centers to orchestrate the operation.

The process can last three weeks to three months. Once drilling and fracking ends, the gear moves to the next well and a valve several feet tall is installed.

In Cleburne, Texas—the seat of Johnson County—Robert Webb lives about a 10th of a mile from a Chesapeake Energy Corp. well from which he receives a royalty check. He says he gets about $100 a month from one nearby well and a handful of others close by. He and his neighbors pooled their acreage and lease as a group.

The arrival of the drilling rig and fracking equipment “sounds like setting up of a circus, more or less,” he says. “Then the trucks start rolling in and you don’t know where they are coming from, but they keep coming.”

The rig was like a “big old Christmas tree, it is lit up like nobody’s business,” he says. “The activity is practically 24/7.” Chesapeake drilled three wells back-to-back in July, according to the state.

Still, he doesn’t regret signing the lease and says he “probably would” do the same thing again. “It is still free money. Someone offers you money for something that is not going to affect you dramatically, of course you are going to take it,” he says.

Methodology

The Wall Street Journal obtained data documenting the locations and drilling dates of more than 2.3 million wells in 11 states from DrillingInfo, a data provider to the oil industry, and the Ohio Department of Natural Resources. The Journal split the wells into two groups: those drilled before the year 2000 and those that were drilled in the year 2000 or later. The industry began to use modern hydraulic fracturing techniques, which set off the ongoing energy boom, on a large scale in 2000. For most states, the data is current through the end of 2012; a small percentage of the wells were drilled in 2013.

To classify each well, the Journal used the date that drilling of the well commenced—known in industry parlance as the “spud date.” When that wasn’t available, the date when the well first started producing oil or natural gas was used. About 21% of the well records for the states outside of Ohio were missing key pieces of information and were discarded from the analysis.

To determine how many people lived near wells that had been drilled from 2000 forward, the Journal created SQL Server databases with geographical data fields for the latitude and longitude of each well, and for the polygon shapes of all 2010 Census blocks in each state. The Journal then calculated which Census blocks were within 1 mile of a well that had been drilled after 1999.

A block was included in the analysis if any part of it was within a mile of the well. The population figures the Journal used for the Census blocks are from the 2010 Census, the most recent data available at the block level.

Nationwide, the drilling shows little sign of letting up. A decline in natural-gas prices has made drilling less attractive around Fort Worth and in northern Louisiana, where the wells produce mostly gas. So the rigs migrated to North Dakota and south of San Antonio to target oil from the Bakken and Eagle Ford shale formations.

There are more than five wells, on average, per square mile of Johnson County. In Pennsylvania, home to the Marcellus Shale, the average is a little less than one well per square mile. Parts of the commonwealth, including counties near Pittsburgh, have more than four per square mile.

On the state’s other side, Wyoming County has relatively few wells clustered in a few communities. One is Mehoopany, where Emily Krafjack lives 500 feet from one well pad; another is less than a mile away. When the closer well was drilled, she says, the noise was so loud that she couldn’t hear her television, and idling trucks waiting to unload fracking sand filled her house with diesel fumes. She shares in well royalties, which she declined to disclose.

She is working with a nonprofit that strives to strike what she calls a “delicate balance” between the irritation of living near wells and the benefits they bring. Her group’s mission isn’t to stop the drilling, she says, but to preserve quality of life and protect the environment while helping the economy.

She appreciates the gains brought by the drilling boom. “I know one guy who was an over-the-road trucker, but his truck was parked in his driveway for a year and half because there were no jobs,” she says. “He got a job hauling rocks and he’s home every night and makes a good paycheck.”

Concerns about drilling have led to a host of state and local restrictions, from an outright drilling moratorium in New York state to rules in numerous towns that limit hours of drilling and require companies pay for sound barriers. Municipalities in Pennsylvania filed a lawsuit when the state attempted to limit their ability to use their zoning powers to curtail drilling. The state Commonwealth Court sided with municipalities in 2012 and threw out a section of a state law, called Act 13, that would have limited municipalities’ ability to zone and regulate drilling.

The federal government is weighing steps to make drilling less intrusive and safer. There is a rule set to go into effect in 2015 to require capturing emissions from fracking sites. The EPA is also studying the potential effect of fracking on drinking water and will release findings and recommendations in 2014.

Some companies say they are working to become better neighbors. Mark Boling of Southwestern Energy Co. says if the industry fails at that, it will face community opposition that could eventually make it harder for it to drill.

“The industry has done a great job of figuring out how to crack the code below ground—how do you get natural gas or oil out,” he says. “However, it hasn’t spent a lot of effort thinking about how you handle development above ground. We need more unconventional thinking about this.” He cites better mufflers for machinery, equipment to capture air emissions, such as volatile organic compounds, and sound barriers around drilling pads as examples of what could be done.

Often, the difference between homeowners’ embracing the drilling or opposing it is tied to whether they benefit financially. Research firm IHS Inc. estimates, in a recent report funded by energy companies, that landowners received $504 million last year from leasing land to drillers, though it couldn’t specify how many owners split that amount. The report didn’t calculate how much was paid in royalties on oil and gas actually pumped; industry officials said it was a larger sum.

“Often, the difference between embracing or opposing drilling is tied to whether land-owners get royalties. ”

In the South Texas Eagle Ford, recent research by the University of Texas at San Antonio’s Institute for Economic Development found the 14-county region, the size of Maryland and Massachusetts combined, generated an average of $250 an acre last year in royalties. This ongoing payment is in addition to one-time leasing bonuses that were generally a few thousand dollars per acre.

Sue Barnett of Arlington, Texas, owns 10 acres, one of the few larger, undivided properties in her suburban area between Fort Worth and Dallas. She signed a lease with a unit of Exxon Mobil Corp. XOM +0.30%Exxon Mobil Corp.U.S.: NYSE $88.23 +0.26+0.30% Oct. 28, 2013 4:00 pm Volume (Delayed 15m) : 9.55MU.S.: NYSE $88.14 -0.09-0.10% Oct. 28, 2013 7:15 pm Volume (Delayed 15m): 376,198 P/E Ratio 11.08Market Cap $388.36 Billion Dividend Yield 2.86% Rev. per Employee $5,208,80010/18/13 Four Takeaways From Google’s R…10/17/13 Energy Industry’s Odd Couple: …10/14/13 ExxonMobil Shuts California Oi…More quote details and news »XOM inYour ValueYour Change Short position , which built a drilling pad about “50 steps from my lawn,” she says.

Three wells were drilled on her property starting in 2009. “The work went like clockwork,” she says. Exxon said it would pay to move her horses to another barn if they were spooked by the noise, but it wasn’t necessary.

“When they handed me the check, I said I would pay my taxes and some bills I owe and put away some money for rainy weather,” she says. “I am grateful.” She declined to say how much money she receives.

But many homeowners don’t get payments. It is legal, and in some places common, for land ownership to have been split off from “mineral rights”—the rights to underground resources. One person ends up owning and living on the land, while a different group owns the right to drill there. Home buyers don’t always know or think to look into whether a property comes with the mineral rights.

Russ Braudis, the former mayor of Azle, Texas, northwest of Fort Worth, says one subdivision there was split down the middle. Half the residents owned their mineral rights—and got leasing and royalty checks—and the other half didn’t. “Whether you were for it or against it,” he says. “That’s where the line was drawn.”

John Tintera, former executive director of the Texas Railroad Commission, the state oil and gas regulator, says he regrets failing to address the many landowners who shouldered drilling’s burdens but didn’t see payments. People who got “mailbox money” for the minerals “were a lot more willing and financially able to adjust to the activities that occur with normal drilling.” He said as a regulator he most often heard complaints from people who owned land, but not mineral rights.

One of the most common complaints from residents is the influx of truck traffic. Drilling and fracking a single well can require more than 1,000 trips by trucks to haul in equipment, workers and water. After the well is finished, an average of one truck a day visits each well, according to the Texas Department of Transportation.

Nearby fracking can also lower the value of homes based on a fear that it will contaminate groundwater. One study in suburban Pittsburgh that examined fracking found that, between 2004 and 2009, prices of homes near wells were 10% higher than homes further from wells—unless the home relied on well water as opposed to municipal water, in which case the sale price was 16% lower than expected.

“There is clearly a perception of a risk to groundwater,” says study author Lucija Muehlenbachs, a research fellow at Resources for the Future, a nonprofit energy and environment researcher.

Ms. Johnson, whose deck view in Colorado was marred by the rig, said a few days ago that things got better when drilling finished. Now she is worried about future wells on the same pad, a common practice. “Is there more to come?” she says. “You just want your little piece of paradise to stay the same.” She doesn’t get royalties.

She also worries about fracking’s effect on water. “I need to be educated,” she says, “because now it’s in my backyard.”

Studies haven’t backed up claims of widespread water contamination. However, well proximity has raised some questions. A recent scientific paper found that water wells in Pennsylvania within one kilometer of a natural-gas well had higher levels of dissolved methane, and distance to wells had a significant correlation with the amount of gas in the water.

Methane in water carries a fire risk if it escapes and builds up in sufficient quantities. The energy industry contends the higher methane levels are naturally occurring and unrelated to wells.

“Any time there is more industrial activity where people live, in some cases in people’s backyards, there is more chance that something goes wrong,” says Robert Jackson, a biology professor at Duke University who has researched fracking.

“We’ll have a million new oil and gas wells drilled over the next few decades in the U.S.,” he says. “It’s in everyone’s best interest to get them right.”

Some municipalities are working to do that. A.J. Krieger, town administrator in Erie, Colo., about 20 miles north of Denver, last year signed a voluntarily agreement with two energy companies to mandate the use of vapor-recovery units—something that isn’t a typical industry practice but is becoming more widespread. The units capture pollutants, including carcinogens, that can be vented into the air during fracking operations.

Mr. Krieger says drilling can coexist with suburbs as long as local governments have “a strict adherence to quality-of-life issues and a good-faith effort to implement best practices.”

Back in Johnson County, Texas, Roger Harmon, the top elected official since 1995, says change “has been good and it has been bad.” Many residents received large leasing and royalty checks, and the county lowered its property-tax rate thanks to drilling revenue. But he mourns the loss of “the country atmosphere,” he says. “Everywhere you look, there is a well.”
—Donna Bryson contributed to this article.

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