NO FRACKING, NO BOOM
RED HOUSE — A decade ago, Bill Janoske’s father and uncle signed a deal.
The energy company Chesapeake Appalachia LLC would pay them $5 a year for each of the 660 acres on the family’s former dairy farm, a stone’s throw from West Virginia in three directions.
In exchange, the company had the right to drill a natural gas well on their property using the booming extraction technique known as fracking.
The 10-year deal would pay the Janoskes at least $33,000, and potentially more in royalties on any gas it produced.
No wells were ever drilled. The state held up fracking to study safety and write rules. Janoske’s father and uncle died.
In the meantime, Janoske took advantage of another energy boom to hit the region: He allowed a wind farm to build four turbines on the property. But he’s still waiting for a gas rush to help pay the bills. It appears unlikely to come soon. While fracking is set to become legal in October, state lawmakers are considering a permanent ban. But even if they don’t prohibit the controversial practice, energy companies and industry analysts say the falling price of natural gas and the expected costs of complying with stringent state regulations have made it less appealing.
Energy companies once held leases to extract or store natural gas underground on nearly 100,000 acres in Garrett County, home to most of
Maryland’s piece of the gas-rich Marcellus shale geological formation.
But amid uncertainty about when fracking would be allowed and whether it would be cost-effective, they have let the great majority expire or have terminated them. Only about 4,000 acres remain under contract today.
And with booming supply from wells in neighboring Pennsylvania and West Virginia, which have lighter regulation and which jumped into the fracking business when it was more profitable, energy companies are not in the market for new deals in Maryland.
“You’re not going to have all these companies in here trying to sign people up,” said Sen. George Edwards, a Western Maryland Republican. “The gold rush is over.” Fracking opponents, who fear the health and environmental risks they associate with the industry, say their battle isn’t over.
They plan to flood Annapolis this week, as the General Assembly holds the first of a series of hearings on the proposed ban and other fracking legislation.
“It’s certainly a fair thing to say there doesn’t appear to be imminent risk, but that is not really the issue,” said Paul Roberts, president of the board of the anti-fracking group Citizen Shale. “I think a lot of us feel we’re just one international incident away from energy commodity prices going up very quickly. It’s a very uncertain world right now.”
Over time, analysts say, investment in gas pipelines and liquefied natural gas facilities such as the Dominion Cove Point LNG terminal now under construction in Southern Maryland could help spur renewed industry growth and prime demand for new wells. Such projects are expected to be a priority under the administration of President Donald Trump, who won 78 percent of the vote in conservative Garrett County.
Janoske and his neighbors will be watching. Wind turbines like the ones on his land stirred controversy at first, he said, but have come to blend into the mountain scenery. He believes fracking could do the same.
“If it’s safe, it’s an income,” he said. “And in Garrett County, an income for these farms is a good thing.”
A decade ago, as the gas industry bloomed, energy companies flocked to Western Maryland and the greater Appalachian region.
The area is at the center of the Marcellus shale formation, a 600-mile-long, 400million-year-old layer of sediment rich with largely untapped gas reserves.
Much of it is obtainable only by the technique known as hydraulic fracturing, which involves injecting fluids at high pressure into the rock to release the natural gas trapped within.
Production across the country boomed as fracking and new horizontal drilling technology unlocked vast stores of fuel. Output grew every year from 2005 to 2015. It declined slightly last year, but is forecast to bounce back in 2017.
Pennsylvania helped lead the boom, ramping up its production eight times over from 2010 to 2015, according to the the U.S. Energy Information Administration. Virginia, West Virginia and Ohio have also allowed wells, while New York banned fracking in 2014.
Maryland has approached fracking with caution.
While the industry was surging in 2011, then-Gov. Martin O’Malley, a Democrat, and the Democratic-led General Assembly adopted a two-year moratorium on fracking. Drilling remained on hold as a statemandated study was conducted.
O’Malley finally proposed regulations to govern fracking in the final weeks of his administration in 2014.
The General Assembly passed a new two-year moratorium in 2015. It became law without the signature of Republican Gov. Larry Hogan. With that ban still in place, the Hogan administration released its own set of fracking rules last year that loosened some elements of O’Malley’s proposal but tightened others.
Before fracking, gas production via conventional vertical wells in Maryland peaked at nearly 1 billion cubic feet in the late 1960s, according to the energy information agency.
The output fell to between 20 million and 50 million cubic feet a year over the past two decades. It has hovered at the low end of that range in recent years.
Companies began approaching property owners in Western Maryland with lease offers in 2007 and 2008. They signed contracts on just shy of 100,000 acres in Garrett, according to data collected by the county and provided to The Baltimore Sun by Del. Wendell Beitzel.
A sliver of Marcellus shale extends underneath Allegany County. County commissioner William Valentine said no leases were signed there.
Landowners in Garrett say there seemed to be little reason not to sign. Leases offer a flat fee, plus royalties if gas is harvested.
“My dad did it for years, and so I just did what he did,” said Ronald Brant, whose 14 acres near McHenry remain leased through February 2018. “I don’t know a whole lot about this fracking thing. I’m not sure which way I stand.”
Linda Burch, who owns a mobile home on an acre her parents left for her south of Accident, said a promise of $30 was enough to get her to sign.
Later, she realized it wasn’t $30 annually, but total, over a decade that ends this July.
“I’m sorry I signed it,” Burch said. She is concerned fracking would contaminate the high-quality water pumped from her well. “It wasn’t even worth my while.” Just more than 4,000 acres remain leased in the county, and most of the agreements don’t actually allow fracking. The bulk were signed by Texas Eastern Transmission LP, now a subsidiary of Houston-based Spectra Energy.
A spokeswoman for the company said the agreements allow only gas storage.
Without more pipelines to carry the fuel to markets or liquefication plants to make it easier to transport, storage in tapped-out conventional wells is the only option for companies like Spectra. It holds gas in 72 wells in the Accident area of Garrett County and sells it as heating fuel.
Chesapeake Appalachia, a subsidiary of Chesapeake Energy, holds the lease on Janoske’s 660 acres south of Oakland, and another that covers more than 300 acres nearby. Both expire next month. The company did not respond to requests for comment.
A spokesperson for Exxon Mobil confirmed that its subsidiary XTO Energy Inc. no longer holds leases in Maryland. Records show they all expired last September. Company officials did not respond to questions about possible new leases.
Drew Cobbs, executive director of the Maryland Petroleum Council, said it’s difficult for any company to even consider investing in the state while the rules that will govern any eventual fracking remain in flux.
A state legislative panel that reviews regulations is still considering the Hogan administration’s proposal.
“Until there’s some certainty of what the rules and what the requirements are, the permit fees and such, a company can’t even consider [projects],” Cobbs said.
That’s not to mention the broader economic conditions that have slowed domestic natural gas production. Gas prices surged in the mid-2000s, but then fell as supply surged, and they have remained relatively low.
Economists don’t expect those conditions to change soon. Prices and output could still rise in the long run — particularly given the Trump administration’s emphasis on domestic jobs and energy.
Natural gas can replace some oil, said Charles Olson, a professor at the University of Maryland’s Robert H. Smith School of Business.
But isn’t subject to the same volatile price swings because it can’t be packaged and shipped as easily unless it’s turned to liquid.
Instead, Olson said, it will take more demand for natural gas to make fertilizers, to power trucks or trains, or to heat homes to put upward pressure on gas prices. All those uses require more investment in natural gas technology and infrastructure first.
Garrett County officials aren’t counting on fracking for any rapid economic growth.
They have long held that if drilling can be done safely, they support it, said Alex McCoy, director of the county’s Economic Development Office.
“Gas prices are going to have to be substantially higher and the marketplace is going to have to believe those gas prices are going to be sustainable before anyone’s going to be willing to commit to any additional wells,” he said.
If the boom ever does come, Janoske knows where he’s headed: Nashville. The retired schoolteacher performs country music around the region, and visited the genre’s center six times last year with his wife. “I’d buy a new farm,” he joked. But he still welcomes the caution around fracking as state lawmakers debate the issue once again. Like his neighbors, he drinks well water, and fears contamination.
“I don’t know the right answer,” he said. “Whatever they decide, I’ll live with.”