Case – 3 

IIBMS – Gas or Grouse

IIBMS – Gas or Grouse

The Pinedale Mesa (sometime called the Pinedale Anticline) is a 40-mile-long mesa extending north and south along the eastern side of Wyoming’s Green River Basin, an area that is famous as the gateway to the hunting, fishing, and hiking treasures of the Bridger-Teton wilderness. The city of Pinedale sits below the mesa, a short distance from its northern end, surrounded by hundreds of recently drilled wells ceaselessly pumping natural gas from the vast pockets that are buried underneath the long mesa. Questar Corporation, an energy company with assets valued at about $4 billion, is the main developer of the gas wells around the city and up on the mesa overlooking the city. Occasionally elk, mule deer, pronghorn antelope, and other wildlife, including the imperiled greater sage grouse, descend from their habitats atop the mesa and gingerly make their way around and between the Questar wells around Pinedale. Not surprisingly, environmentalists are at war with Questar, whose expanding operations are increasingly encroaching on the wildlife habitat that lies atop the mesa. Yet the mesa is a desperately needed resource that provides the nation with a clean and cheap source of energy.

        Headquartered in Salt Like City, Questar corporation drilled its first successful test well on the pinedale Mesa in 1998. Extracting the gas under the mesa was not feasible earlier because the gas was trapped in tightly packed sandstone that prevented it from flowing to the wills and no one knew how to get it out. it was not until the mid-1990s that the industry developed techniques for fracturing the sandstone and freeing the gas. Full-scale drilling had to await the completion of an environmental impact statement, which the Bureau of Land Management (BLM) finished in mid-2000 when it approved drilling up to 900 wells on federal lands sitting on top of the Pinedale Mesa. By the beginning of 2004, Questar had drilled 76 wells on the 14,800 acres it leased from the federal government and the Wyoming state government and had plans to eventually drill at least 400 more wells. Energy experts welcome the new supply of natural gas, which, because of its simple molecular structure (CH4), burns much more cleanly than any other fossil fuel such as coal, diesel oil, or gasoline. Moreover, because natural gas in extracted in the United States, its use reduced U.S. reliance on foreign energy supplies. Businesses in and around Pinedale also welcomed the drilling activity, which brought numerous benefits, including jobs, increased tax revenues, and a booming local economy. Wyoming’s state government likewise supported the activity since 60 percent of the state budget is based on royalties the state receives from coal, gas, and oil operations.

        Questar’s wells on the mesa averaged 13,000 feet deep and cost $3.6 million each, depending on the amount of fracturing that had to be done.1 Drilling a well typically required clearing and leveling a 2- to 4- acre “pad” to support the drilling rig and other equipment. One or two wells could be drilled at each pad. Access road had to be run to the pad, and the well had to be connected to a network of pipes that drew the gas from the wells and carried it to where it could be stored and distributed. Each well produced waste liquids that had to be stored in tanks at the pad and periodically hauled away on tanker trucks.

        The BLM, however, imposed several restrictions on Questar’s operations on the mesa. Large areas of the mesa provide habitat for mule deer, pronghorn sheep, sage grouse, and other species, and the BLM imposed drilling rules that were designed to protect the wildlife species living on the mesa. Chief among these was the sage grouse.

         The sage grouse is a colorful bird that today survives only in scattered pocket in 11 states. The grouse, which lives at elevations of 4,000 to 9,000 feet and is dependent on increasingly rare old-growth sagebrush for food and to screen itself from predators, is extremely sensitive to human activity. Houses, telephone poles, or fences can draw hawks and ravens, which prey on the ground-nesting grouse. It is estimated that 200 years ago the birds-known for their distinctive spring “strutting” mating dance-numbered 2 million and were common across the western United States. By the 1970s, their numbers had fallen to about 400,000. a study completed in June 2004 by the Western Association of Fish and Wildlife Agencies concluded that there were only between 140,000 and 250,000 of the birds left and that “we are not optimistic about the future.” The dramatic decline on their number was blamed primarily on the destruction of 50 percent of their sage brush nesting and mating grounds (called leks), which in turn was blamed on livestock grazing, new home construction, fires, and the expanding acreage being given over to gas drilling and other mining activities. Biologists believe that if its sagebrush habitats are not protected, the bird will be so reduced in number by 2050 that it will never recover. According to Pat Deibert, a U.S. Fish and Wildlife Service biologist, “they need large stands of unbroken sagebrush” and anything that breaks up those stands such as roads, pipelines, or houses, effects them.²

         In order to protect the sage grouse, whose last robust population had nested for thousands of years on the ideal sagebrush fields up on the mesa, the BLM required that Questar’s roads, wells, and other structures had to be located a quarter mile or more from grouse breeding grounds, and at least 2 miles from nesting areas during breeding season. Some studies, however, conclude that these protections were not sufficient to arrest the decline in the grouse population. As wells proliferated in the area, they were increasingly taking up land on which the grouse foraged and nested and were disturbing the sensitive birds. Conservationists said that the BLM should increase the quarter-mile buffer area around the grouse breeding grounds to at least 2-mile buffers.

        In May 2004, the U.S. Fish and Wildlife Service announced that it would being the process of studying whether the sage grouse should be categorized as an endangered species, which would bring it under the protection of the Endangered Species Act, something conservationists had been urging the Fish and Wildlife Service to do since 2000. Questar and other gas, oil, and mining companies adamantly opposed having the grouse listed as an endangered species because once this was done, large areas of federal land would be off-limits to drilling, miming, and development. Since 80 percent of Wyoming is considered sage grouse habitat, including much of the Pinedale Mesa, Questar’s drilling plans would be severely compromised.

          Questar and other companies formed a coalition-the Partnership for the West-to lobby the Bush administration to keep the grouse off the endangered species list. Led by Jim Sims, a former communication director for President George W. Bush’s energy Task Force, the coalition established a website where they called on members to lobby “key administration players in Washington” and to “unleash grass-roots opposition to a listing, thus providing some cover to the political leadership at Department of Interior and throughout the administration.” The coalition also suggested “funding scientific studies” designed to show that the sage grouse was not endangered. According to Sims, the attempt to categorize the grouse as endangered species was spearheaded by “environmental extremists who have converged on the American west in an effort to stop virtually all economic growth and development. They want to restrict business and industry at every turn. They want to put our Western lands of –limits to all of us.”3 Dru Bower, vice president of the petroleum Association of Wyoming, said,”[endangered species] listings are not good for the oil  and gas industry, so anything we can do to prevent a species from being listed is good for the industry. If the sage grouse is listed, it would have a dramatic effect on oil and gas development in the state of Wyoming.”⁴

           The sage grouse was not the only species affected by Questar’s drilling operations. The gas fields to which Questar held drilling rights was an area 8 miles long and 3 miles wide, located on the northern end of the mesa. This property was located in the middle of the winter range used by mule deer, elk, moose, and pronghorn antelope, some of which migrate to the mesa area from as far away as the Grand Teton National Park 170 miles to the north.Migration  studies conducted between 1998 and 2001reveled that the pronghorn antelope herds make one of the longest annual migration among North American big game animals.the area around pinedale is laced with migration corridors used by thousand of mule deer and pronghorn every fall as they make their way south to their way south to their winter grounds on the mesa and the Green River Basin. Traffic on highway 191 which cuts across some of the migration corridors sometimes has to be stopped to let bunched-up pronghorn herds pass.5 Environmentalists feared that if the animals were prevented from reaching their winter ranges or if the winter ranges became inhospitable, the large herds would wither and die off.

Unfortunately, drilling operations create a great deal of noise and require the constant movement of many truck and other large machines, all of which can severely impact animals during the winter when they are already physically stressed and vulnerable due to their low calorie intake. Some studies had suggested that even the mere presence of humans disturbed the animals and led them to avoid an area. Consequently, the BLM required Questar to cease all drilling operations on the mesa each winter from November 15 to May 1. in fact, to protect the animals the led them to avoid an area. Consequently , the BLM required Questar to cease all drilling operation on the mesa each winter from November 15 to May 1. In fact, to protect the animals the BLM prohibited all persons, whether on foot or on automobile, from venturing into the area during winter. The BLM, however, made an exception for Questar truck and personnel who had to continue to haul off liquid wastes from wells that had already been drilled and that continued to operate during the winter (the winter moratorium prohibited only drilling operations, and completed wells were allowed to continue to pump gas throughout the year).

Being forced to stop drilling operations during the winter months was extremely frustrating and costly to Questar. Drilling crew had to be laid off at the beginning of winter, and new crews had to be hired and retrained every spring. Every fall the company had to pack up several tons of equipment, drilling rigs, and trucks and move them down from the mesa. Because of seasonal interruption in its drilling schedule, the full development of its oil fields was projected to take 18 years, much longer than it wanted. In 2004, Questar submitted a proposal to the Bureau of Land Management. Questar proposed to invest in a new kind of drilling rig that allowed up to 16wells to be dug from a single pad, instead of the traditional 1or2. the new technology (called directional drilling) aimed the drill underground at a slanted angel away from the pad-like the outstretched tentacles on an octopus-multiple distant locations could be tapped by several wells branching out from a single pad. This minimized the land occupied by the wells: while traditional drilling required 16 separate 2-4 acre pads to support 16 wells, the new “directional drilling” technology allowed a single pad to hold 16 wells. The technology also reduced the number of required road ways and distribution pipes since a single access road and pipe could now service the same number of wells that traditionally required 16 different road and 16 different pipes. Questar also proposed that instead of carrying liquid wastes away from operating wells on noisy tanker trucks, the company would build a second pipe system that would pump liquid wastes away automatically. These innovations, Questar pointed out, would substantially reduce any harmful impact that drilling and pumping had on the wildlife inhabiting the mesa. Using the new technology for the 400 additional wells the company planned to drill would require 61 pads instead of 150, and the pads would occupy 533 acres instead of 1,474.

         The new directional drilling technology added about $500,000 to the cost of each well and required investing in several new drilling rigs. The added cost for the 400 additional wells Questar noted, however, that “the company anticipates that it can justify the extra cost if it can drill and complete all the wells on a pad in one continuous operation” that continued through the winter.⁶ if the company was allowed to drill continuously through the winter, it would be able to finish drilling all its wells in 9 years instead of 18, thereby almost doubling the company’s revenues from the project over those 9 years. This acceleration in its revenues, coupled with other saving resulting from putting 16 wells on each pad, would enable it to justify the added costs of directional drilling. In short, the company would invest in the new technology that reduced the impact on wildlife, but only if it was allowed to drill on the mesa during the winter months.

        Although environmentalists welcomed the company’s willingness to invest in directional drilling, the y strongly opposed allowing the company to operate on the mesa during the winter when mule deer and antelope were there foraging for food and struggling to survive. The Upper Green River Valley Coalition of environmental group, issued a statement that read: “The company should be lauded for using directional drilling, but technological improvement should not come at the sacrifice of important safeguards for Wyomings’s wildlife heritage.” To allow the company to test the feasibility of directional drilling and to study its effects on wintering deer herds, the Bureau of Land Management allowed Questar to drill wells at a single pad through the winter of 2002-2003 and again through the winter of 2003-2004. the 5-year study would continue until 2007, and Questar hoped to be permitted limited drilling on the mesa during winter until then. In a preliminary report on the study, the Bureau of Land Management said there was “no conclusive data to indicate quantifiable, adverse effects to deer” from the drilling. The Upper Green River Vslley Coslition, however, sued the bureau for failing to adhere to its own rules when it allowed Questar and other companies to drill on mule deer range on the mesa during winter and for failing to conduct an analysis of the potential impact before granting the permits, as required by the National Environmental Policy Act. As of this writing, the suit has not been resolved.

   Question

1. What are the systemic corporate and individual issues raised in this case?
2. How should wildlife species like grouse or deer be valued, and how should that value be
   balanced against the economic interests of the of company like Questar?
3. In light of the U.S. economy’s dependence on oil, and in light of the environmental impact of
   Questar drilling operation, is Questar morally obligated to cease its drilling operation on the
         Pinedale Mesa? Explain
4. What if anything should Questar be doing differently?
5. In your view, have the environmental interest groups identified in the case behaved ethically?  

IIBMS – Gas or Grouse?

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