Living With Fracking

Hydraulic fracturing or fracking has turned the U.S. Energy outlook upside down. Since 2010 U.S. natural gas production has increased 25% and oil production, 60%. We have passed Russia as the world’s largest gas producer and within a couple of years we may pass Saudi Arabia as the world’s largest oil producer. 

Fracking elicits a pretty strong negative response from some, probably only exceeded by the mention of genetically modified food (GMO). But it doesn’t appear fracking is going away any time soon so what can be done to make sure drilling is done in a safe way? Where is the middle ground here? Foreign Affairs had a good series of articles on fracking in the May/June 2014 issue. Here are three big issues I think that need to be addressed.

1.) Contain the methane. Unburned methane is a powerful greenhouse gas and we don’t really know how much methane is leaking now from pipes in the drilling process. The EPA recently issued requirements that all new natural gas wells employ a “reduced emissions completion” technique by January 2015. A lot of this is to address methane leaks. This is a good first step.

Some say that if methane leaks are not controlled then natural gas becomes as “dirty” as coal.

Fracking wells reach below groundwater      Source:     The Week

Fracking wells reach below groundwater 
Source: The Week

2.) Groundwater contamination. Where you stand on this one depends on where you sit. No one seems to agree whether groundwater is actually being contaminated by fracking. There have been no gold standard studies here. The industry argues that aquifers go down to only 400 feet or so. Hydraulically fractured wells today are at least a mile deep before they go sidewise (see right). If groundwater is being polluted it is more likely to happen from leaks in the drill pipe as oil and gas is drawn to the surface. The Center for Sustainable Shale Development in Pittsburgh, a collaboration between oil companies and environmental groups is putting in place standards for how to cement around the pipes in the drilling process. This is important. 

*Extractable quantities.       Source:  Bloomberg Markets

*Extractable quantities.      
Source:  Bloomberg Markets

3.) What’s in your secret sauce? Drillers have argued that the mixture of water, sand and chemicals they use in fracking is proprietary information. A better “sauce” yields more oil and gas. But the public is suspicious about what is going in the ground. Fortunately things are becoming more transparent now. Twenty states have adopted rules requiring companies to disclose the chemicals they use and many oil companies are voluntarily releasing this data.

There are approximately a hundred new fracked wells in the U.S. every day. The benefits to the economy are enormous: cheap natural gas for consumers and industry, jobs in the oil field, royalty income for land owners and a more politically secure source of energy. But all this must be done safely. Can it? The jury is still out but we are starting to see a lot of necessary and sensible things being done in fracking. I am an optimist here.  

Source: Bloomberg Markets

Source: Bloomberg Markets