OilandGasMonitor.com – Breaking Ground: Dangerous U.S. Export or Path to Prosperity?

image001As the United States stands on the brink of becoming an energy-independent nation, thanks to the vast shale gas and oil reserves now accessible through hydraulic fracturing, environmental groups warn other countries against succumbing to the lure of this “dangerous American export.”

Some countries, like France, have simply banned the practice, while others are eager to fully develop the potential of their reserves—a potential that only promises to grow as new discoveries and technologies increase the inventory of recoverable gas reserves.

Case in point, estimates reserves in the U.S. have only gone up over recent years, with one Canadian analyst group reporting last year that the U.S. has three times the amount of recoverable natural gas reserves as previously estimated. This isn’t a development unique to the U.S. It’s the result of improvements in extraction technologies and methodologies that are opening up previously inaccessible reserves to new production.

Why U.S. Leads Shale Production Boom

What is unique about the American natural gas boom is the particular combination of factors behind it, including extensive pre-existing geological data from decades of land surveys and drilling operations, private ownership of mineral rights, adequate infrastructure and a number of states that have embraced the opportunities produced by advancements in fracking.

Conversely, the very factors driving the American shale boom are working against other countries with large shale gas reserves. China, Poland, India and Latin America each face, to varying degrees, obstacles to full shale gas production, including difficult geology, lack of infrastructure, drought and government control, taxes and royalties interfering with investment.

Even U.S. Shale Still Facing Challenges

The U.S. shale gas boom faces its own challenges, of course, primarily from environmental groups pressuring regulators to limit or altogether kill fracking operations. So far, New York is the only state that has placed a moratorium on the practice while conducting its own study and review of the research. Unlike New York, Pennsylvania, Texas, North Dakota, Montana, Ohio, California and Wyoming have embraced the wealth pumped into their states via fracking operations.

It seems that no amount of study will ever be enough for the environmental groups, who persist in perpetuating myths and misinformation about fracking that are not supported by credible research. Studies like the Energy Institute at the University of Texas at Austin’s 2012 : “Fact-Based Regulation for Environmental Protection in Shale Gas Development,” an exhaustive audit of the claims versus the facts that found no direct evidence of health impacts associated with fracking chemicals, are dismissed by anti-fracking groups. Similarly, a 2011 study by Duke University concluded “We found no evidence for contamination of drinking-water samples with deep saline brines or fracturing fluids.”

It doesn’t matter who’s behind the research, though that’s often a point of contention. However, an environmental organization, The Pacific Institute, also could not find clear evidence of contamination from fracking. The nonprofit organization, whose stated purpose is to “create a healthier planet and sustainable communities,” tackled the question of fracking’s impact on water resources in its June 2012 report. Noting that there are numerous anecdotal accounts of various water sources polluted by fracking and/or adverse health effects caused by fracking pollutants, the report states, “Most significantly, a lack of credible and comprehensive data and information is a major impediment to identify or clearly assess the key water-related risks associated with hydraulic fracturing and to develop sound policies to minimize those risks…the discourse around the issue is largely driven by opinion.”

Yet the anti-fracking movement presses on.

Anti-Fracking Groups Slowing Shale Production

And those in the oil and gas industry are partly responsible for the momentum and success of the anti-fracking message machine. Still playing catch-up, the oil and gas industry has done a poor job getting ahead of and framing the conversation around fracking. The damage is evidenced in the ongoing and never-ending new studies and calls for additional regulations:

In September last year, the House of Representatives proposed a number of new requirements and other measures to the Bureau of Land Management:

§  Public disclosure of the pre- and post-fracturing chemicals and additives

§  Re-assessment of the use of FracFocus.org as the system for the public disclosure of chemicals and consideration of a government-run system that would be subject to open records laws and that would allow the information to be published in an open, searchable format

§  Banning the use of open-air pits to store wastewater from hydraulic fracturing operations

§  Setting up strict guidelines for variances or waivers from the regulations

§  Inclusion of rules relating to set-backs in order to control air pollution

The problem with all of this is that these measures duplicate or are actually more lax than the many state regulations already in place. Current Wyoming regulations, for example, require the pre-fracturing disclosure of all chemical identities and concentrations of each additive used in the hydraulic fracturing process.

Yet, just the mention of more regulation has already hurt exploration in the prolific Bakken Shale in North Dakota, where the number of oil-focused rigs in the state have dropped to its lowest point since July 2011. Operators in the field are concerned that the federal government might decide to get into the business of regulating hydraulic fracturing.

NatGas An Unstoppable Force

Despite these setbacks, the U.S. natural gas market is and will continue to be strong because the real benefits far outweigh the imagined risks: It’s a cleaner source of energy; the U.S. is fortunate to have vast domestic reserves; technologies for accessing it are continually evolving and getting better; and it offers a huge profit potential for not only drilling and production companies, but ancillary operations as well as suppliers and local, state, and national coffers, to name a few.

And, responsible oil and gas companies have been responsive to the concerns of regulators and environmental groups. The industry has worked with legislators to develop regulations designed to ensure the highest level of safety and environmental protection, as well as best practices for well operators.

Many recycle the wastewater produced by fracking, developing their own systems or using recycling services, and others even recycle the residual waste materials to be used as de-icing agents.

Whether other countries may view fracking as a dangerous American export, the practice is opening many to the potential for great wealth and increased national energy independence, and it’s here to stay.