Cornell Energy Conference
Ben Tettlebaum: So welcome everyone to the Cornell Environmental Law Society and Water and Land Use Clinics 2011 Energy Conference; Gas drilling, Sustainability and Energy Policy Searching for Common Ground. I am Ben Tettlebaum, conference chair. Thank you all. If you are not from Ithaca, you have joined us on a beautiful typical Ithaca afternoon, so thanks for being hardy and coming out. We hope you join us for the rest of today certainly and tomorrow and we have a great program lined up for you all. If you look in your physical programs in your folder, we have numerous gracioussponsors for this conference. They also have some booths over in Myron Taylor Hall. We encourage you to explore those when we transition thereafter our events in Annabelle Taylor Hall and I just wanted to mention one of our largest sponsors the David R. Atkinson’s Center for Sustainable Future. ACSF is a vitally important center at Cornell that works across disciplines and is truly invested in sustainability both locally and globally and they're quite a growing program. Speaking of the future, nothing less than just that is what's at stake and at issue at this conference; both regionally and on a national and infact international level. Sustainability perhaps best captures the focus of these next two days of anything in the title of our conference. We're going to explore that via discussion, debate about energy policy, particularly through the lens of shale gas development. Please note that this conference is at CornellLawSchool for a reason. The law is woven into the fabric of our society and like it or not, lawyers often know how to make its operation functional. That also imputes to us in our profession a responsibility to make it sustainable. The Cornell Water and Land Use Clinics work with the community and with the region to make that duty a reality. If you see value in this too, then the EnvironmentalLaw Society urges you to remain involved and help us to further environmental and natural resources law programming here at CornellLawSchool. As we said, if you were at our community forum last night, we want for these next two days to cut to the heart of the issues of this conference and I think our panelists last night did that quite well and we're going to try to continue that for the next two days. They're packed with phenomenal speakers who have given us a lot of their valuable time to join us from across the country and also right here at Cornell for the next two days. We know the phrase common ground can be contentious in and of itself and so you could insert a question mark at the end of the conference title. But we have worked hard also to ensure that at least common ground means gathering together at the table multiple sides of these important issues. That said we request that you respect each other and each other's views that will be spoken today. We request that you respect all the conference volunteers who are graciously giving their time to help out and make this event possible and of course, we request that you respect all of the panelists coming from any side. We're fortunate to have a research institution like Cornell where we can host an event such as this, where we make it academic but the academic issues are substantive and have practicalconsequences for our world. So, again, we ask that you respect everyone in that forum and hear out multiple sides of the debate. We also hope to keep this conference free and open to the public in the future. To that end, we have a number of donation stations set up over in Myron Taylor Hall and if you feel that you can the Environmental Law Society would very much appreciate any donations that go directly to the student run organization. So without further ado and cutting more to the issues, I am going to introduce our opening keynote speaker, Susan Christopherson, who is a professor at Cornell and we are very pleased to have her with us today. She is the Jay Thomas Clark professorand city and regional planning at CornellUniversity, received her PhD from the University of California at Berkley. She is an economic geographer whose research in teaching focus is on economic development, urban labor markets and location patterns and service industries, particularly the media industries. Her research also includes both international and U.S. policy oriented projects. Her international research includes studies in Canada, Mexico, China, Germany and Jordan, as well as multi-country studies. In the past three years, she has completed studies on advanced manufacturing in New York Southern Tier, the Photonics Industry in Rochester, the role of universities and college in revitalizing the Upstate New York economy and production trends affecting media industries in New York City. She has written more than 50 articles and 25 policy reports on topics in economic geography and economic development. Her current projects include studies of Phoenix industries, in old industrial regions and most relevant to today a comprehensive, economic impact analysis of natural gas drilling in the marcellus shale in New York and Pennsylvania. Professor Christopherson and her team have already released a number of policy reports from this study, which can be found at Please help me in welcoming Susan Christopherson.
Susan Christopherson: Thank you I am very happy to be able to give a talk without a PowerPoint, which I think is much preferable and I am very happy to be able to speak to an audience that is composed both of my colleagues at Cornell and Cornell students and of people from upstate New York from communities that have real concerns about these issues. I think that and this is very ironic, one of the positive sides of this issue and the interest that it has generated is that it has really enlivened public, political debate and action and I was just in a meeting in Watkins Glen on Wednesday and gave a talk there to 150 people and I am just thrilled to see people interested in the issues that they are confronting, both obviously environmentally and also economically in Upstate New York because that his my passion in life. I want to tell you a little bit about this project that I am working on. I am going to try to talk more generally of what I think are some of the key questions that we need to think about when we think about marcellus shale drilling. From an economic development perspective, but I want to frame this a little bit more broadly in the hope that it can give you some questions to ask during this wonderful conference and I want to thank the conference organizing committee, particularly and the environmental law society and paretically Ben Tettlebaum who I think if I ever need a lawyer he is going to be it because of the care and attention to detail that has characterized this conference and it has been very impressive. The research that I am presenting is quite unconventional. It is funded by the Heinz endowments and the park foundation. It really isn’t conventional academic research. It is really more in the order of an investigation of what some of the issues are and attempt to go beyond the economic impact reports that have provided almost the only information on the economic consequences of marcellus shale gas drilling and the foundations also are very, very interested and concerned with public education, so I think that this investigation and I am going to present some of the results from it is really an attempt to widen public discussion and bring people some ideas, some ways of thinking about marcellus shale gas drilling, not only in the environmental sphere but in the economics sphere. It has been mentioned that our results are being presented on a web site Which you can find by goggling me. We are looking at a series of topics. As all of you know environmental issues are at the center of questions about the marcellus shale gas drilling and my talk will bear a little bit on environmental issues. But because so many speakers in this conference are concerned with environmental issues my perspective is really going to be about how we think about this in terms of the economic development side. I want to talk a bit about what we have learned about investigating this issue and this is somewhat directed at my academic colleagues. This is a very frustrating subject to do research on. For one thing it is about everything. It is about transportation. It is about land use. It is about population growth and everybody says why aren’t you studying that. It is about everything, particularly if you are taking the approach which we are which is really an investigatory approach rather than a conventional research approach. One thing that we have learned over the course of doing this research which started last June is that there are still very large uncertainties about what is going to occur with marcellus shale gas drilling, both environmentally and economically. We really don’t know about the long-term risks. We don’t know what level of drilling will increase our environmental risks. We don’t know who will bear the risks and so I think that there are still very, very serious limits to our knowledge about what is going to occur. The research results on marcellus shale activities drilling and the boom bust cycle are very limited. We have had to rely on qualitative methods rather than quantitative methods, partly because the evidence that we have is very recent. There aren’t longitudinal studies and because what we have had to rely on is information from different shale places in the U.S. and the data that they have is based on how different states, whether it is Wyoming or Texas or Pennsylvaniaon how they regulate shale gas drilling activities. So this is a caveat that in most cases what we are relying on is qualitatively based data, interviews, gathering comparative information with one exception and that is in with regards to trucks. We do know a lot about trucks because Cornell has for example a local roads program, which I have to admit I have worked at Cornell for 20 years and every year I would get that local roads program brochure and I would look at this and I think local roads, why do we have a local roads program? Isn’t this just a waste of money? Okay the local roads program has come into its own. We now know why we need a local roads program. They have done some excellent work on showing what exactly is going to happen and measure the impact of the transport to wells, well pads and produced water from well pads. They have really done human service in telling us what is going to happen in very quantitative ways. Apart from that it is very difficult at this point to have the kind of data that we need to do, longitudinal analysis on specific topics. One topic that people are very, very concerned about is monetizing the affects of environmental changes, air pollutions form the trucks and compressor plants for example and again if any of my academic colleagues would know to do that kind of research it requires longitudinal data. It requires very, very specifically scientifically derived hypotheses and probably at least a million dollars. So even though we know these things are important we are in the position in our project of just going with what we have got. Now I want to talk for a minute about what is new about hydrofracking and what is not. There is a long history of natural gas drilling in the marcellus region. The first well in the united states was in Ferdonia New York, part of the wonderful era in New York state. It was made out of wood apparently and the first commercial natural gas well was in Pennsylvania. So there is long history of natural gas drilling in New York and Pennsylvania and even vertical natural gas shale drilling is not a new technology. What is new about this, there are a couple of things. One is the capital intensive technology that is being used and the volume of water need to extract type gas. I would say that there is another thing that we can bring to the table. I think to understand the shale gas boom we need to examine the market conditions in which shale gas is being exploited and company strategies in response to those market conditions. I think there is increasing awareness that shale gas drilling has elements of a speculative bubble, but with potentially very serious environmental consequences. The fundamentals underlying the investments in shale gas drilling are very poorly understood. I know that Arthur Berman is going to be at this conference and he has done a lot of work looking at those fundamentals. There is evidence from other shale gas places of very shape declines and a very short drawing cycle. So we do have to understand what is driving the companies that are doing the shale gas drilling. When we look at this cycle it has four phases. One phase is pre-production which involves land leasing, negotiations with state and local officials, sort of setting up the terrain, obtaining the land under which the resource lies. Then there is the drilling phase which is the phase of intense activity and the flow of expenditures into a locality. We see this in Tonawanda in Bradford county in Pennsylvania. A whole series of subcontractors come into the county and into the well sites. There is an operating firm but they employ subcontractors and this creates risk because you are working with many different firms and then the drilling teams who come from Oklahoma and Texas from the most part move then from well to well and I will talk about this in a moment. Then comes a drop. This is where I wish I had some visuals but I will try to use my hands. I was remembering that commercial where somebody goes like this and then everybody goes out and does this, so maybe. What you are going to get is very intense drilling in particular localities, one locality and another locality is particularly in what is called the sweet spot. In many of the other shale gas places the oil and gas companies have really focused on a fairly small area. This is why in New York state it is going to be Broome and Chemung counties primarily, but the marcellus shale play is a very complex play geologically so it is not clear how it is going to work out in terms of the drilling activity and where the operating companies are going to be willing to take risks. This is a very, very expensive, very high risk activity. As I said this industry is closer to being like financial services then it is to manufacturing. They are taking risks. It is debt-driven right now because they can not make a profit at $4.00 for gas prices at $4.00. So the question is how they are planning and strategize to find wells that are commercially viable. So we have to look, not just at the geology and the technology, we also have to look how the firms are thinking about this and looking for commercially viable wells. After this period of movement of drilling which will take place in a sequence of locations then there will be a drop off and the drilling will stop. The purchases that the drillers made from sandwich wagon and taverns that will stop. Those indirect jobs will go away and we will have a bust. So the question that we have is how long will this drilling phase last, how fast will it proceed and then what will happen in the bust period. If you are interested in the economic side of this and I should say this pace and scale which his how we think about the pace of drilling and the scale of drilling will then have effects on the cost to communities and to environment. There is a lot of controversy about this question. You will hear speakers at this conference who will say this is going to last forever. I read one article from a Pittsburgh newspaper that said boom without a bust. I thought boom without a bust? This is a natural resource extraction industry, there is going to be a bust. Will it last seven years the boom? Then we could talk about what is going to happen in the boom. Will it last seven years? Will it last ten years? It is going to go place to place. Will it last 20 years? This really is important. So I want you to pay attention to the speakers today when they talk about this and pay attention to what their interests are in telling you how long this is going to last because that is very important. As I said at the core of our research project when we were looking at how to understand this pace and scale became our central question. How do we understand how fast this is going to happen and what is going to be the spacial distribution of the drilling? If we think about that I will just give you some factors that affect pace and scale; transportation costs. The marcellus shale is considered to have good economics. It is a favored shale play right now because the transport cost to the major eastern markets for natural gas, of course the transport costs are lower.