SHALE GAS AND FRACKING

States take action on shale gas ‘fracking’

By Matt Kennard in Washington

Published: June 2 2011 17:44 | Last updated: June 2 2011 17:44


When a gas well in Pennsylvania exploded in April it sent thousands of gallons of fluids coursing through the drilling site and into a local tributary. The fluids were laced with a medley of dangerous chemicals, forcing seven families to evacuate their homes.

The accident created more controversy for a method of gas extraction known as hydraulic fracturing, which supporters claim holds the key to the US ending its reliance on foreign oil and cutting its greenhouse gas emissions. “Fracking” has been around for decades, but only recently were big shale gas deposits found in the US, prompting new questions about the environmental impact.

The April accident was on a drill site working the Marcellus Shale, which stretches over New York, Pennsylvania and West Virginia, and has been cited by analysts as the biggest natural gas deposit in US. Analysts expect that up to 100,000 wells along the shale will be drilled over the next half century if allowed to go ahead unrestricted.

This week, Cuadrilla Resources, the first company to explore for shale gas in the UK, said it was suspending operations at one site on fears that it might have triggered two small earthquakes near Blackpool, north-west England. In the US, some local communities are up in arms over the practice. State legislatures across the country are passing new laws to stem the perceived environmental fallout. The states are taking it upon themselves to act as regulators say they will have to wait years for their investigations to be completed.

Fracking involves injecting fluids into shale rock to unlock the natural gas inside. Many countries around the world are betting on shale gas as a big future source of energy as traditional sources of oil run out. Last week, the parliamentary energy select committee in the UK supported the use of the technique.

But environmentalists and community groups say the fluids used to break up the rock contaminate the water supply. “Clearly water pollution is a big problem, as well as the impact on air quality,” said Myron Arnowitt of Clean Water Action, an environmental group opposed to fracking. “We need to make sure drinking water supplies are protected and stop waste water being discharged into rivers without real treatment.”

The Pennsylvania state environmental agency found 1,200 environmental violations at gas drilling sites in 2010, and one in six wells had violations.

On Sunday, the Texas House of Representatives passed a bill that would require fracking drillers to make public the chemicals they use. “Although there have been no cases of the process contaminating groundwater in Texas, the people say they want to know the contents of the fluid used in the process,” said the Texas bill’s sponsor, Republican Jim Keffer.

Texas Railroad Commission chairman Elizabeth Ames Jones told a US energy department hearing on Thursday that it was “geologically impossible for frack fluid to migrate into the water table” because the process took place too deep in the earth.

Texas is the frontier of some of the biggest discoveries of shale rock, particularly in the south of the state. One recently-discovered formation which runs from the Mexico border to the south of San Antonio has been called the largest onshore oil or natural gas find in the past half-century. Bills have been introduced in California, Pennsylvania, New Jersey and New York over the past months. Last month, France’s lower house voted to ban fracking completely.

The Environmental Protection Agency has been criticised for responding slowly to concerns. It began its study of the practice on local drinking water last month, but its final report is not expected until 2014.

“It’s too long,” says Ray Ludwiszewski, who was general counsel at the EPA in the 1990s and is now a lawyer at Gibson Dunn.

“We will lose several years of development and have to spend money on bringing in natural resources from around the world.”

The Obama administration is in a bind over the issue. Fracking is relatively clean in terms of greenhouse gas emissions and could deliver national security and balance of payments benefits if it enables the US to substitute domestic natural gas for foreign oil.

Energy secretary Steven Chu has announced a group of environmental, industry and state regulatory experts will make recommendations to improve the safety and environmental impact of the technique.

And there is money to be made. Kohlberg Kravis Roberts said this week it expected a return of almost treble its investment in Hilcorp Resources, a shale gas venture, illustrating how hydraulic fracturing technology is leading to big gains for investors.

But last month, investors at ExxonMobil and Chevron called for more transparency on shale gas production at annual shareholder meetings. “The fact that 41 per cent of Chevron investors voted in favour of more disclosure, an exceptionally high level of support for a first-year resolution, shows how seriously the company’s shareholders are taking this issue,’’ said Michael Passoff of As You Sow, the shareholder activist group.

Rex Tillerson, ExxonMobil’s chief executive, seemed to acknowledge as much at the company’s shareholder meeting. “There are areas that we cannot get access to if we don’t address those concerns,”’ he said.