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11 July 2011
Fracking companies must accept their
environmental responsibilities if the world is to reap the benefits of
shale-gas development, says David Zetland*
advances in hydraulic fracturing (fracking) technologies and techniques
promise to unlock vast reserves of natural gas. Additional shale-gas
supply will reduce energy costs, carbon emissions and, for many
countries, dependence on foreign energy producers.
Not surprisingly, fracking is now subject to
massive media and political attention. Unfortunately, that interest is
mostly negative: there's a risk and perception that fracking threatens
to deplete and pollute water supplies.
Fracking can affect freshwater in four ways.
First, fracking injects a large volume of water underground; this water
has to come from somewhere. Second, chemicals mixed with water before
it's injected pollute the water, which can mix with other waters. Third,
fracking fluids that escape the injection well and shale formations can
mix into aquifers or reach the surface through unexpected routes.
Fourth, fracking can release methane that pollutes local aquifers and
the water being pumped to the surface.
The public don't like water pollution, and
politicians and regulators are listening to them. Consequently, the
fracking industry risks being shut down before it gets started. Not
because it's inefficient, technologically complex, or unprofitable, but
because of its real or imagined threat to freshwater supplies.
The French government has banned fracking. The Polish government wants to encourage fracking, but worries about adverse side effects. The situation in the US varies from state to state, but federal officials at the Environmental Protection Agency are preparing a report that will have significant impacts.
The industry must take responsibility in
promoting sound fracking practices that protect the environment if it
wants to avoid a premature death by legislation or regulation. Inaction
or opposition may result in the death of a goose that's only just begun
laying golden eggs.
Technology is not so important
Anyone in the oil business knows the produced
water resulting from oil drilling and production carries heavy salt
loads and petroleum residues. Produced water is often reinjected into
wells (simultaneously disposing of an unwanted substance and increasing
Producers in Canada's oil sands use vast
quantities of water to remove and upgrade heavy oil. They recycle a
large portion of that water, but they also draw on freshwater supplies
and discharge dirty water into holding ponds that are so large that migrating birds mistake them for natural lakes.
In most cases, however, water consumption is
not the problem. Producers in Canada's oil sands divert less than 1% of
local river flows. A single frack can use as much as 5 million gallons
of water (around 18 million litres), but a farmer would be pleased to
sell that water to a fracking crew; he might charge $2,000 for water
that cost him $200 to pump from the ground.
The problem is water pollution. Produced water
must be disposed of without polluting other water supplies; water from
oil-sands operations must be held, reused or cleaned. Fracking water
that returns to the surface needs to be handled; the water that stays
underground cannot mix with freshwater in aquifers (even if this is a
Pollution can be prevented or removed with technology. According to Global Water Intelligence's (GWI) Produced Water Market Report,
Canada's oil sands use about 14 million barrels a day (b/d) of water to
produce 1.8 million b/d of oil. US energy companies are producing about
57 million b/d of water from all types of output (mostly oil). But the
North American market for handling produced water has an annual turnover
of only $5 billion; that’s only a few days of oil-sands production.
The low price of cleaning water won’t keep
industry from looking for cheaper ways of meeting clean-water
regulations or prevent environmentalists from claiming industry cuts
corners while discharging too much dirty water, but it can help both
sides find a common ground for compromise.
For frackers, there’s good news: because gas’s
regulatory environment is still developing and based on regional
markets, the sector has a better chance of solving the problem ‑
maintaining water quality while protecting profits ‑ than the globally
interlinked oil industry.
Paying the cost of clean
GWI provides a useful survey of the techniques
the industry uses to handle and clean its water. First, minimise
diversions; then maximize reuse; and, finally, treat and discharge
what’s left. Treatment costs that depend on the volume of pollutants to
be removed can result in capital expenditures ranging from $300 to
$3,000 a barrel and operating expenditure of $1 to $5/b.
Local regulators determine two critical factors: the fee and quality standard for discharged water.
Regulators try to balance the economic,
environmental and social interests of citizens who want jobs, tax
revenues, clean water and cheaper energy. Many people describe this
balancing act in terms of polar opposites ‑ 100% clean water and zero
jobs or many jobs and water armageddon – that are driven by an
underlying logic: stiff regulation will force industry to go elsewhere.
That logic is strong in the oil industry but
weaker in the gas business. The relatively high cost of transporting gas
over large distances means it is usually distributed locally.
It is, therefore, possible to establish and
apply local regulations to match distribution networks, so that all
fracking operations are compelled to use the technology that does most
to protect local water supplies. This requirement can be guaranteed by
performance bonds that pay for the clean-up of any pollution that occurs
during operations and for a period after.
Such a regulatory burden will result in higher
costs, but these can be passed to customers if all producers incur
them. Consumers will pay higher prices if gas is still cheaper than
alternative energy sources. They may accept higher prices if they see
cleaner operations in their region. Unfortunately, some operators
are gaming outdated regulations and pursuing lowest-common-denominator
Consolidating operations and profits
The number of players in the fracking industry
makes it difficult to co-ordinate actions to address pollution, but
wildcats have been herded in the past. In the 1930s, the Texas Railroad
Commission (TRC) used its local regulatory authority to impose order on
numerous oil-drilling operations. The TRC set pumping quotas that slowed
supply expansion and put a floor under falling prices. Some thought the
TRC's actions favoured bigger operators, but there's no reason why
regulation and consolidation of fracking operations wouldn't help small
businesses. They need only reasonable competition among bidders for
their permits and/or operations.
Regulation will turn forced pooling on its
head: instead of forcing landowners to participate in shale-gas
drilling, drillers in a watershed will have to meet the same standards
for spill prevention and discharge quality. (Recall the bonding
requirement; insurers responsible for damages will police operations.)
Operators will be free to innovate and improve
their technologies and techniques for fracking and producing gas. They
will need to do so only within the constraint of protecting freshwater.
It's easy to predict that maximising profits while maintaining quality
would drive innovation in clean production. It will also lead to
consolidation, as less-sophisticated firms are forced to merge with
larger players capable of meeting standards.
Most economists tend to oppose regulations
that concentrate industries, slow innovation and reduce competition, but
regulation as a second-best option makes sense if the alternative
free-for-all produces spills and pollution, a political backlash and
premature death of a promising, nascent technology. Consider how lax
regulation has set back deep-water drilling (Deepwater Horizon) and
nuclear power (Fukushima-Daiichi).
The bottom line
Fracking will deliver more natural gas, at
cheaper prices, from more-reliable parts of the world. It can do so
without adverse effects on water supplies, but only with strong
regulation. The industry should embrace and promote useful regulation as
an acceptable cost of doing business. The alternative – weak
regulation, or industry opposition to clean fracking procedures – is
more likely to destroy the industry than increase profits.
Well, technological breakthrough always come with a cost.
Through regulations and innovation there is the hope that this industry
will grow and bring down the price of gas globally. I strongly agree
with your view Mr.David.
oliver ubah |
Jul 15, 2011
This article promotes the use of common engineering
standards, which is normal is all industrial processes involving waste
water. They are rarely the subject of hot media flashes, however. The
amount of treatable water is modest. Fracking is not new; Texas has
hundreds of wells where it has been used for decades.. The only novel
aspect is that gas has been recently discovered in areas of the US where
environmentalists have held power. This presents a political
challenge: how to get all that dirty money, while being pure as snow? I
have every convenience a politician can do it.
Mr. R. L. Hails Sr. P.E. |
Jul 11, 2011
Despite production outages in Opec, oil prices should fall as
the threat of US military action recedes and seasonal demand eases