The man behind the gas plan in Cavan

Australian company Tamboran will presented plans to use the controversial technique of 'fracking' to extract gas deposits in West Cavan to the council's planners this week. Lough Allen Carboniferous Basin good news for Cavan? RM: I think so...What's most important is the depth of the basin. Basically that rock [shale] sits between 500m deep and 1,500m deep below most of the Lough Allen basin - but especially in the centre... The western part of Cavan is certainly within that area. The Petroleum Affairs Division [PAD] in Ireland have given what are called licensing options - so in other words, it is not a right to drill deep. It's an option to pursue the right to drill deep...Essentially it's a cautious step on the part of the PAD...Each company made work commitments ...to spend a certain amount of money - I think it's up to a million dollars in our case... the options we have are two years in duration. So you don't have forever, you've got to do it within two years. From March 2011? ...it was probably April...We will satisfy the licensing option by conducting the work we said we would do to earn the licensing option. Once that work is done, then the PAD will review our work and decide whether we have done it...If we have done it then we will be given a permit to proceed... The exploration permit is the next stage...but that doesn't mean you can drill. You still have to do an environmental impact assessment of the project... [We] will start that this summer. If I give you the work schedule...the first, obvious thing that we have to do is study all the work that everybody else has done...That's going on over the summer. Also over the summer we hope to start the environmental impact assessments, because if we do some day have the courage to drill economically... we will have to show that the full range of impact has been assessed and that would include not just temperatures...it also includes noise assessment...how much noise will we make; traffic because when we drill wells we will be moving a lot of equipment in...most of the work goes into just flattening the ground and making it stable by putting gravel and so on, on it. But you can appreciate that's a lot of truck loads. ..so we have to make sure that we are selecting areas that will have the least possible impact on anybody living around the area. Who are you accountable to? ...As far as I have been briefed, the legal accountability is to the PAD, the buck stops with them... Have you got a threshold of how close a well can be from an inhabited building? I'm not precise right now but I'm going to say, probably at least a half a kilometre, maybe a kilometre or more. From a home or an occupied building? The basic story is the noise - 45 decibels at night and 55 during the day...bottom line is we have got to stay within the legal noise requirements and if we get too close to a house that is simply impossible. Because no matter what you do a heavy truck engine makes a lot of noise. The drilling rigs use some big engines. You say that 'if things go well' you are expecting hundreds of wells. What would the share be in Cavan? ...a quarter of the total play will be prospective within Cavan's boundaries....in Fermanagh...call it 30 per cent...and then 45 per cent perhaps in Leitrim. And that is including some of the land that we don't have which LANGCO may have prospectivity on... Is there a crossover between you and LANGCO? Are you sister companies? ...there is no chance of that. That has been made very clear to both sides that we are separate companies. To erect a well, do you need planning permission passed by the County Council and An Bord Pleanala? ...I don't think we are subject to that at all...We are going to subject ourselves to the county requirements - period. Whether we legally have to or not, maybe that's in debate I don't know, but the fact is we are going to subject ourselves to those requirements because we want to make sure that we meet everybody's requirements. Have you approached any landowners or farmers? ...No we have not approached any landowners or farmers...I really don't want to go around talking with a whole bunch of people about what might happen on their land if we're not sure we're going to go ahead...I'm going to be sure by the end of the summer. Eventually you will have to approach landowners, will you make them an offer they can't refuse? We want to make fair offers. You can appreciate, I have also got a budget...I don't even know what the land value in these areas would be...but we will try to make an offer that they consider worthwhile... We don't want to buy their land, because it is their land. It is never going to be our land...Now we will be leasing it for somewhere in the area - we would hope - of 20 to 50 years, because what will happen, is once you drill a well it can produce for 30 to 50 years. But if there is gas, which is what we obviously hope, then we will be basically paying them a lease for 50 years... We'll pay the market rate for that land up front. I would expect there will be an annual rental fee as well. When do you expect the first well to become operational? I would hope by early 2013. At least a year and a half, but less than two years. Now that's the best case... Best case scenario, how many jobs could you expect to create? In the long run, because it takes time, it will be hundreds of jobs...It will take let's say three to five years to ramp up the jobs, because once we have a rig, then we'll have more jobs... if you have hundreds of wells you'll have, maybe in the long run, a hundred, two hundred people just looking after those wells every day. So there is a sustained job creation and that is a local job. Is the royalty you will pay the Governement a commission above the tax revenue? That's right. Typically once the project is allowed to go forward, then they put a royalty into it. It can be a few per cent, but on a few billion Euros that adds up. And is that on per unit of gas produced? Technically the value of the production, because market prices will float... ...I don't want to get ahead of myself, promising people something that may not even work...but if this project works we are going to see to it that there is a royalty paid to counties. I can't say that LANGCO will endorse that. But our point is that if the Republic Government is charging us a three per cent royalty, let's say, then there's no reason the counties can't get a royalty of three per cent as well... What would you say to those who fear the wells would spoil the beauty of the area? ...we have to minimise our footprint...first of all the wells will be drilled horizontally...that means we drill straight down, and when we get to that formation that we want, say that was at a kilometre, we turn sideways with the drill bit and actually drill sideways. Now the advantage of this is that it means I can co-locate all of the well bores in an area, in one pad, and that way I can reach out to all the surrounding area underground. All people will see above ground is probably a one hectare site...If you drew a box around an area, then inside that the pads would take up a half a per cent of the land... there's no way that's too intrusive. Now we don't go out there and paint these things an ugly kind of orange...So what we also have to do is make them blend in to the community. Typically what height would one be? Well a couple of pieces of equipment, small, very small towers. Tower's the word we actually use but it will be 30ft high. It will have a little spoke sticking up about 30ft. The rest of the lease probably wouldn't be any more than about 15ft high. Now we can paint all of these things to blend in perfectly to the landscape, we'll put trees all around them, so they don't look industrial, and we can basically fit them in... What distance are you considering having them apart? We think two to four kilometres apart because if you imagine that on one lease I might be able to drill a horizontal well a kilometre out underground, and on another pad a kilometre toward it, so that's the minimum length we will be shooting for - a kilometre in each direction, so that makes it two kilometres of separation. Are you aware West Cavan is a high radon gas area? ...Our geologist when I was on my first trip mentioned radon issues. Most of that is associated with the limestones and we will not be drilling limestone rock of course. [Discussion turns to drilling] ...When you drill a well you have to keep the hole from falling in, so what we do is we put down a steel pipe, and then we cement all the way around that pipe. That serves two purposes, it keeps everything from falling in, but secondly it means that absolutely nothing touches the well bore and more importantly it means if you put any fluids into the well bore they cannot get into the ground. And that's important because if you have seen Gasland, when people talk of their water well being contaminated you know that is a simple case that that cement job between the well and the ground water was inadequate. There is really no excuse for that...The cheapest part of the well is drilling that shallow section, and the cheapest part of the well is running a little tool called a cement bond log; costs you about three grand that tells you whether you have good cement or not. But most companies don't run them. Some bright guy thought - oh I'd save some money because why would I want to do that on every well? ...They [some American companies] do not have good habits after a while and the simplest habit is prove it. Prove that you have cement, prove that you have isolation, prove that you will not touch the ground and that is so easy to do, it's just a little bit of money. Like we say if the well is going to cost €3 million, the whole task of making sure that that cement bond is done right, probably isn't even €10,000. So there's just no excuse. As you can imagine we are not going to take any of those risks. We would look pretty stupid if we tell everybody it won't happen and then we don't even prove that it won't. But that's why the radon and so on, it shouldn't be a problem. ...if there are areas of the shale that are found to be, for any reason, incompatible, we won't use them... Would the PAD or EPA have right to have spot checks? ...if the PAD want a random well check, that's fine. And the same will go to the counties, and frankly the same will go to the land owner...So if they are worried in the middle of the night, come on down. And if we can't prove to their satisfaction that it's safe then there should be a process to escalate that. Will you disclose the chemical make-up of the frack fluid? Yes, absolutely. Now we unfortunately can't disclose what we don't know today... The exact chemical make-up that we use depends upon the exact chemical make-up of that rock. We are working on a non-toxic frack...Javad Paktinat... has been in the last years working on chemicals that make it possible for us to use saltier and saltier water...we know now that with a little polymer - a non-toxic polymer, we can stick that into water that is very salty and we can use that water safely in our frack jobs. That is why Tamboran is willing to do 100 per cent recycling - we know we can. Will you publish that research before you use it? Yes the chemicals will be well known...we will definitely declare by September what we are doing for chemicals...I'll have it on the website and at all the community meetings we'll have hand outs. Martin Keeley [CEO of LANGCO] told the Irish Times that the frack fluid they use is typically 99 per cent water and that he would quote "happily drink a glass of it". Would you do the same with Tamboran's? No definitely not...It's about 95 per cent water 4.5 percent sand and about a half a per cent chemicals. Let's pretend that I can simply call one of those chemicals detergents or we call it a surfactant or friction reducer, but... it is really a soap. I wouldn't drink soap. ...I know some of the chemicals that are out there are hazardous and it is our job to keep them from entering the ground water, through very cheap and easily proved methods. But I wouldn't be drinking it. So what if it's a half a percent - it's still a truckload of chemicals. As it stands the best frack fluid you have is still toxic. Let me say that the best frack fluids available to industry still have some toxicity, I agree...Multi-Chem is designing a product that is not toxic - they actually have it already they just have to keep running through the tests. It is not toxic but still kills bacteria by starving it of oxygen. Chemicals are chemicals and we'll do our best to minimise them but as you say those are intentions, the proof will come when we do it. Beyond that the other important reality is that you just protect the well bores in the first place... A good cement job and you're off to the races. How do you ensure the fluid, once pumped into the rock doesn't dissolve through the soil? ...That is a concern that people have raised that this water could somehow leech back out. Let me assure you that if that could happen then that would mean the gas in that rock would also go away. The gas is far more mobile than the water because it is smaller molecules. In fact we use the water to prop open that crack. What happens is when we are cracking it we are crowbarring it open with the water, but when we stop the frack job the ground settles right back down and pins those water molecules in place and the gas molecules sneak around them back to the well bore. ...it's all about proof. We have a technology called micro-seismic...The industry found a way to hang geophones, basically ears, into the ground and when they are fracturing, these ears allow us to triangulate all of the sounds coming from where we are cracking - because, when you crack rock it makes a sound. So we know by monitoring this micro-seismic in 3D in real time we can see exactly where the fracturing is happening. We use it to fine tune our work. We are going to use this on our initial pilots, so everybody will know where our frack went and we will be able to prove that it never went anywhere harmful. What will happen to the produced water? It will be brought to tanks at surface, kept completely isolated so the tanks obviously abide by all tanking rules - like gasoline tanks, you can't afford to have a leak. Will that be beside the pad? Every pad will probably have about million gallons worth of tankage... Those tanks sound as if they will be taller than 15ft. I don't think they are going to be taller than 15...If you have tanks that are too big they are not going to make it down the road because they will knock out power lines and bridges so frankly we will have to use big diameter tanks... ...we are tanking it because on the next well we can use that water, and we will be able to put it into the next well's frack job for example thanks to the research that's going on today... Pads will be self sustaining. We will not be transferring fluid between pads. The whole idea is that each pad gathers it's own water - we will have rain water pits and tanks on site to store all of that water. If you imagine a pad and all those tanks on there. So what will happen is on the first well, we'll inject our water and then some of it will flow back. You maybe get on average about a quarter of it. We'll say 15 to 50 per cent... I would never want to haul that water, first of all it would be very expensive to haul that water and secondly you know that somebody that somebody is going to have a spill, truck will fall over into a ditch or something... At the end of the well's drilling programme, let's say you have drilled all the wells on that pad that you are going to drill - at that point in time, and that could be a decade from now - you are going to have water that you are going to have to clean up. That last bit of water. Now we already have mobile cleaning units in Europe, they come in and they sort through the water and purify it and you end up with a cup of sludge or something which then you have to dispose of at a proper facility. What happens that to that recycled water? At that point in time we can probably inject it into the ground...what I mean by that is that you can probably pour it down one of your wells that you don't need anymore. And then cement everything off when you're done. Once that water is cleaned it will be useful water. That's 10 years out, probably at that point in time once you have cleaned the water you can let it evaporate. There will be all kinds of rules around that obviously we can't evaporate water with anything in it that shouldn't be evaporated. You say you will harvest rain water, and okay it rains reasonably frequently but it is not a large volume of rain. By our estimate right now we will need pits at the edge of the pad, maybe one or two, probably two that are 50m by 50m by about 10ft deep. They are actually commonly used in rainy areas...We pump that rain water into some of the tanks and keep filling up the pond. The other thing we probably will do is we have to investigate how much flow we will get from this, would be to sink a couple of water wells on the edge of the lease and that way we can use that water as well. The water wells would be tapping the shallow water table, nothing deep... What percentage would you think would come from the harvest rain water and what percentage from the water table? Let's say half and half and again the object here is to be in places where we have minimal impact on residents. We don't want to be near anybody's water supply for obvious reasons too. We don't want to be seen to take any water from what they need. And we certainly won't take it from any public systems... If the 50x50m tank was full? We would probably get two million gallons out of that. Initially we're going to try to do this with a little less water... We are going to be trying to do initially with between one to two million gallons and see if we can't get good results with less water. If in the long run we need more water then we'll just need to have more rainfall gathering. Who will actually be carrying out the drilling and well work? It sounds like you are actually physically going to do it - there will be Tamboran employees doing it? That's right we will have a couple of hired experts... We can't hire some of these people yet because we have to make sure that we have something to hire them to do. But they are all waiting on the edge of their seat if we say, 'Hey it looks good'. And then the same thing is true for the completions... We may bring in a company to manage things at some point... There is a really fine company over here called Calfrac, and Calfrac works in many of the US plays as well. How many people would work in Tamboran? How many employees do you have? Right now there's less than 10 of us. If you count our consultants there's nine of us. We will have to hire a lot of people. I see you have interests in the Northern Territory, Queensland, Victoria and Botswana. Right, in all of those areas we will have to actually probably have to bring in a partner company to do that. Have you ever actually carried out commercial gas extraction? Tamboran proper hasn't, I have been involved in several companies that has. Most recently with Southwestern which is one of the bigger US operators and in just a decade they went from being a billion dollar company to being a 15 billion dollar company. So it had a lot of growth because they threw themselves into it. They drilled over 2,000 wells for example. And so I have experience with that. I've got about 20 years in total, but I personally have drilled about 200 wells in terms of projects I've been part of. ...You need teams of people who are experts in each aspect of it. So by the time Tamboran would even be applying for a permit to drill, at least a year away before we would even be able to because of environmental impact assessment. We will have about a dozen people hired specifically from North America that are experts in drilling and completions. Obviously with Gaslands it is such a sensitive thing and there is such a fear of the unknown, can you see how the thought that a company that has never actually done this before could inflame the situation? Fair point, I suppose I would ask people to keep perspective on that. When somebody leaves a company and forms another one, even though that company doesn't have any experience, they do. Pretending that everything worked and we got to the stage where we were drilling our first well, we are going to have people on site who will have collectively drilled thousands of wells. True, but the fear that people have here is that those, same people, like your former company Southwestern, it has legal cases pending still for pollution and that. So people will say yes they have experience with previous companies but those previous companies may not have had a great record either. ...What I would have to say that is, just because you get sued, especially in the US, doesn't mean that there's actually anything wrong. I had a lawyer for a neighbour, and he sued the other neighbour for being too loud on the weekends. There's somebody suing right now, I read this morning, in Texas because, tragic but a couple of years ago two of their relatives died from drowning on a beach and they are now suing the beach operator for not having enough signs telling them that it could be unsafe to swim in the ocean. Fair enough but they still need to meet a burden of proof. Not initially, you can start a law suit and make a lot of noise without having absolutely any proof in the US. Having said that... ...there have been cases which have been supported. Definitely cases, very much so, and so I don't want to run from that issue. The fact is that Southwestern has drilled about 2,000 horizontal wells, they have done so under what I consider to be lighter regulation, for example absolutely no requirement for a cement bond log, which is a simple requirement really and a simple cost, but they have done so and in all of that, they have a handful of people who are actually suing them on something okay. I'm not trying to play a numbers game here, but by US standards that actually makes them one of the best operators. There are companies out there in Canada and others in the Rockies and unfortunately did a lot of this work maybe before people knew as much as they do now, but that's no excuse for not fixing their practices when the problems appeared obviously. There's no question that US practices are the issues there. I worked at Southwestern but I didn't get to drill the wells - 2000 people there. I can always provide to those who really want the conversation, I can provide them with some very clear evidence of what I did do there and one of my presentations to the CEO actually called for greater regulations of our industry except we should be embracing this, we should be setting the bar higher so there are fewer people who can do this and screw this up... I think it is fair that people raise the concern, I can only ask that they consider that the individual experience that is there, but then, and this is what I will say, they should demand of their regulators that there is constant proof of what we are doing. There is no reason that we cannot provide that proof. There is no reason to have a secret about what we are doing. If somebody walked on and said show me that the cement that the cement bond log on this well you are about to frack is fine, then here it is. And frankly that would have been available a long time before we went to the frack anyway. When will public meetings take place? Right in early September... My dream scenario is to have the Leitrim council in September 5 and then within a week or less have the first public meeting... If Cavan meets with us and tells us to come on September 3 we could end up with a public meeting even earlier... The sooner the councils meet with us the sooner we're having public meetings. Is anything agreed at those planning or Council meetings. Well we just tell them what we are going to do and then they ask us all the hard questions. If you have confirmed it with them, people in the public will think what's the point in meeting us now when the horse has already bolted? We meet with them because they are elected to do that...So the council meetings will probably be simple Q&A sessions frankly - they'll ask us stuff and we'll say yes we're going to do it by the rules, here's our plans that everybody's heard of anyway, and somebody will make a couple of speeches probably about how this is evil and maybe somebody else will say that this is good because it will bring jobs and they will do what politicians have to do, which is debate amongst themselves the long term strategy of this kind of thing. But that does nothing to help the person who is going to live next to it. So I would agree with you, it [a public meeting] has to be done. If a majority of the people in Cavan decided that they didn't want gas extraction, would you respect their wishes and leave? It's not a simple answer because majority is a hard thing. I'm not suggesting that anyone will hold a referendum or something and I'm not even sure that that would get you a majority because not everybody turns out for a referendums. I think what we have to come back to is if people are really opposed to what we are doing then we will have to scale down. Instead of people saying okay let's have 20 wells drilled in two years or something, we'll say, why don't you let us drill two? And then we can monitor those two and if they pass, then we can talk about some more. It's a respect for their fear, or outright concern, but at the same time let's test the idea. That will always be my fall back position. That if people say outright, well I don't care how many jobs it might create, I don't want to trade an ounce of land or an ounce of risk for this situation and if we honestly got anything approaching that serious response of course we would have to reconsider working in that area initially. So let's be simple and say Cavan says yes and Leitrim and Fermanagh are too nervous. Good then we'll do our programme in Cavan, we'll show everybody that it works, and that we can do it. And then the other counties can think about it some more and then we can keep talking. If we can't convince people at these meetings, and they in turn then tell their council members to oppose us, then we're not welcome there, we will not have a social permit there. Ultimately do you need the permission of the landowner anyway? I take it you can't go and build a well on someone's land who doesn't want you there. Absolutely not. If every land owner said no, then that's another problem isn't it? Then it's not about an amount of money. In fact when people are saying no for good honest fears, and so on, money just insults them. Is there anyting I haven't asked that you think is important? Even though the council planning and eventually council meetings are going on, that this train has not even ticketed much less left the station. Even after those council meetings we have no approval, no social permit, no right to do anything. The ticket comes from the community. What kind of things could the company do that would help prove to them that we are going to do it right? They have a Council, but do they want to have like a Citizens' Advisory Committee, where it's actually landowners, residents, maybe representatives of the environmental groups - does it make sense from the people themselves to say yeah, let's have a group of people who bird dog these guys - keep an eye on us.' Are people out of the process in anyway? No we have done nothing until we have spoken to the people.