Tuesday, September 29, 2009

Hydraulic Fracturing Needs to Come Clean

There is going to be a lot of discussi0n in coming months over the technique of hydraulic fracturing. Much of this will come from the Appalachian region, where the Marcellus Shale is on the verge of ramping up. Fracing is also being discussed in Congress, where the FRAC Act has been introduced to regulate hydraulic fracturing under the federal Safe Drinking Water Act, from which it was previously excluded.

First, a little bit on fracing. Here is a good explanation of the practice (the second half of the article). It, along with horizontal drilling, is the key enabling technology for the production of shale gas.

The controversy over fracing comes from the use of potentially dangerous chemicals as a small part (+/-1%) of the injection fluid mix. Now that the Marcellus Shale is being developed in earnest, there are many environmentalists and communities raising concerns over the use of these chemicals. Because there is limited information about the contents of fracing fluid – the contents change depending on the geology and the company selling the fluid – there is some misinformation being circulated by opponents of the practice. The discussion has fed a movement to limit Marcellus drilling on a local and regional level.

While drilling has taken place in the Appalachian region for 150 years (Titusville, PA was the site of the first oil well drilled in the U.S. exactly 150 years and one month ago in August 1859) and Pennsylvania and West Virginia have the second and third most gas wells in the country, respectively, the industry doesn't seem as ingrained in the region as it is in Texas and Louisiana. Appalachian residents also believe, rightly so, that the beauty of the region and the quality of drinking water need to be preserved.

Recent incidents of spills, most notably by Cabot Oil & Gas in Dimock, PA, have heightened concerns. There is no proof that fracing impacts aquifers, and incidents like Cabot’s result from surface spills and accidents. Opponents to the practice, however, do not differentiate how the damage occurred, only that it did occur.

Gas production companies hold that the practice is very safe, especially because the chemicals are injected thousands of feet below the surface and the fluid’s dangerous chemicals are used in very small quantities. One problem they have in making the argument is that they are bound by their suppliers’ confidentially agreements not to disclose the mix of ingredients because of the proprietary nature of each company’s fluid. Schlumberger and Halliburton don’t want the other to know the recipe for their secret sauce.

There has been a recent movement by E&P companies, especially Chesapeake Energy and Range Resources, to pressure their service providers to disclose the chemicals and seek new, less dangerous chemicals that do the same thing without the risk. Technically, the service providers don’t have to do disclose their fracing recipes and look for safer alternatives, but it would be in the best interest of the gas industry for them to do so. If their opacity leads to regulation of the practice, they will be forced to disclose their recipes eventually.

There is a bright light shining on the gas industry now thanks to the recent shale discoveries and the opportunity for natural gas to be used as an environmentally-friendly alternative to coal. But the future of natural gas is drilling all over the country, not just in Texas and Louisiana where people often turn a blind eye towards drilling. The gas industry is going to have to prove that it is a good neighbor and an effective steward of the land if it is going to be welcomed in new prospects.

Natural gas is poised to become this nation’s leading energy source, and it is in the best interest of everyone involved in the industry to be transparent and responsible. The “golden goose” is at hand – don’t let it get strangled by intransigence.

[UPDATE 9/30/09: Here is an article from Bloomberg about Schlumberger pressing its suppliers to reveal the contents of fracing fluid.]

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