Replies to This Discussion

Permalink Reply by Max on November 28, 2010 at 8:53

Les,

Thanks for the info.

I do wonder though, is the anti-fracing crowd green, or does the green from coal, railroads, and imported oil sway their input?

max

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Permalink Reply by Robert Duke on November 28, 2010 at 9:25

I think we happen to be living through a time right now where a lot of things have gone wrong, and both "big business" and "big government" have violated the public trust in one way or another. All business thinking has become about shortterm profit, driven by the need to give stockholders ROI, and sorry, but that does not produce the best longterm solutions. The government seems incapable of getting anything right, and politicians are perceived as only beholden to special interests. How many of you are absolutely incensed by the whole range of things that have happened on Wall Street? Has that been in the public interest? I think there is a huge emotional response to all the violations of the public trust, if you will. I think O&G, due to excesses in the past, is an easy target for distrust, and while these shale plays could and should be a huge boon for the nation, breaking our dependence on foreign oil, lots of folks are not going to automatically believe that it comes without hidden costs. They sure as heck are not going to automatically believe info coming from the O&G industry.

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Permalink Reply by Les Bamburg on November 28, 2010 at 10:03

Max, I believe it is a mixture of interests.

1) The "green" element is primarily anti-fossil fuel (oil, natural gas, coal) and believes we can meet all our needs with renewable energy such as wind, solar, biofuels, etc. They also tend to be anti-nuclear.
2) The "Nimby" element which is against most any development that may impact their view, peace & quiet, traffic, etc.
3) The "local environmental" element that has legitimate concerns about air & water quality and the impacts of development.
4) The "infiltration" element that has ulterior motives (coal?).
5) The "entertainment" element that will just up for any cause and carry a sign or wear a t-shirt even if they are not sure the issues.

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Permalink Reply by sesport on November 28, 2010 at 10:50

Max - IMO, it's both. Les cites "outside influences" stirring the pot in the NE, yet Oklahoma is a far cry from being a neighbor to those states. They, too, are tag teaming with energy providers.

All in all, perhaps all stakeholders should come to the table with a list of things they're willing to concede. O&G should bring concessions to what they hear as concerns from the citizens, whether mineral owners or not as all COULD be impacted. The sectors consuming the fuels should come with their list, as they're the ones providing the consumers. And the citizens/consumers need to give a priority ranking to what they want, then be willing to ante up for those things, as Max cites.

The public is shouting loud & clear that they want transparency in all things. Down to the most minute detail. I say give it to them, let them see, but be prepared to defend the decisions made with strong science & data because if it's not already supported with such there won't be a leg to stand on anyway come crunch time.

We can create jobs by producing our resources and fostering development of new technologies, we can bolster energy security by developing domestic resources, we can be respectful of & responsible with our most precious resources (environment & water), but everyone is going to have to give a little to get there. Need to come to some kind of consensus.

As to the point of this topic, there ARE instances of defective casing that have caused concerns about the water supply. But I won't broadbrush and attribute this to the industry. As in my profession, I view it as an "operator" issue.

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Permalink Reply by john goodday on November 28, 2010 at 10:34

I would like to see the Northeastern group (Marcellus Shale) concerned about the enviornment ban all fracture-related drilling in the Marcellus Shale until there is 100% agreement amongst the landowners, politicians, eco-groups, operators, etc. It would be economically beneficial to all other Shale(s) around the country as there would be less gas on the market, thus driving the price upward.

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Permalink Reply by P.G. on November 29, 2010 at 4:59

The gas prices would probably jump at the news of that much of a cold snap on the way, huh?

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Permalink Reply by Steve P on November 29, 2010 at 17:38

great discussion. I have only a few relevant points to assert, but I will assert one of them with much conviction. Someone asked if the goverment is capable of tailoring (my term) regulations to specific locations or situations, or if it is always "one size fits all." After 20 years working in a strongly federal government regulated area, I can pretty much assure all of you that the federal government is incapable, and generally unwilling, to do anything other than "one size will, by God, fit all." Too big for some, way too tight for others, but there it is. Stated a more cynical way, when one site gets cancer, the entire industry has to take chemotherapy.

If the industry doesn't get out in front of this, the feds will come in and do their thing, and we will all be losers.


In a previous post on some other topic, I made the point, and made more eloquently here by Les, that "we are all in this together." The future of natural gas as a major supplier of the energy that the US desparately needs will be diminished by shutting down the operations in New York, despite any short term gains my HS holdings will realize. There are some risks from O&G exploration, and from what I've seen from the BP Deepwater Horizon, it appears that there is a need (as much as this pains and distresses me) for more regulation of off shore drilling. For starters, the oil companies shouldn't just cut and paste info from their off-shore Alaska environmental impact statement into their Gulf of Mexico EIS.

Every time a bad actor screws up and gets in the news, it will affect all of us.

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Permalink Reply by Steve P on November 29, 2010 at 18:59

If this remains a "local issue" I'll feel a lot better about it. And i was a very strong supporter of "states rights" until 2 years ago when my career relocated me to California. They take states rights to the extreme out here, and not in ways which a good Southern boy like me agrees with.

I fear that the notion that a landowner can do what they want as long as the don't affect the neighbors is past us in this country. It took the US Supreme Court to convince the EPA that a farmers pond in Illinois wasn't part of the "nations waterways" (and therefore, subject to regualtion by the feds) a couple of years ago. I agree that developing our energy resources is a national security issue, but we don't want to put that to a national vote right now. there are lots of people, including a sizeable majority here in CA, that think that fossil energy is evil, anything related to the oil and gas industry is at least suspect if not evil, and the sooner the US moves away from fossil fules, the better, no matter what the cost is to the economy or jobs. They (foolishly) think that all of those new "green energy" jobs will make it okay. It is pretty scary when the people that think they know WAAAY more than the rest of the country is so misinformed and naive.

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Permalink Reply by dbob on November 30, 2010 at 16:20

All,

Good discussion. I also recognize a federal approach/oversite of fracturing could be heavy handed. The best model, IMHO, is the federal UIC program. Most states administer their own UIC programs, and the EPA staff is fairly modest given the number of injection wells drilled nationally. EPA retains some oversite, but mostly works to ensure the state regulations meet the requirements of the federal rules.

The second issue is the “study” of hydraulic fracturing. There are several issues, including what question it is intended to answer, how is it designed, how is it implemented, and who pays for the study. The questions could range from “does hydraulic fracturing lead to chemical contamination of underground drinking water in sufficient quantity to affect human health” to “does oil and gas development affect water supply”. Obviously, how the study question is framed affects the design. Also greatly influencing the design is the target reliability of the study. Without getting too much into the statistics, generally speaking, a larger sample size increases reliability. Due to the nature of the problem, any study will need a high degree of reliability, and a corresponding large sample size.

For grins, lets assume the study question is “does hydraulic fracturing of deep shales lead to chemical contamination of underground drinking water in sufficient quantity to affect human health?” There are a number of ways to go after this question. I like the BACI approach, or ‘Before and After Controlled Intervention”. The key to BACI is that you gather data before the event, in this case fracing. This allows you control for existing issues, like the gasoline fuel tank or dry cleaners that has been leaking for 30 years . Some of this BACI data already exists, particularly in water wells monitored by the USGS, various state agencies, and certain well owners. You’ll also probably need to drill a number of new water wells, designed to allow for sampling from all the separate water producing intervals. Oh, and because some of the concern is long term, you’ll probably be following up on those wells for years. That and the location of your water monitoring would need to be kept confidential to make sure operators didn’t change their fracing behavior and skew your study. So you start out and identify a population of existing water wells with data before fracturing, and drill some new ones, then test, and test again after fracturing. Figure for high reliability you are testing 2,000-3,000 water wells nationwide, at a cost of $1200/test including volatiles via EPA 8260, semi-volatiles via EPA 8270, methane, metals, and probably a few other things. With other costs, figure your study is going to run $5 to $10 million/year not including drilling new water wells. Increase costs by another 50% if the government is running the study.

If industry implements the study, you’ll have a hew and cry from environmental groups regarding the outcome. If EPA implements, it will take longer and costs more to complete. And if the environmental groups implement it, it will probably rely on a more biased case study approach. At the end of the study, say in 5 years, maybe you get an outcome indicating say 1 in 1000 (0.1%) fracturing jobs cause contamination of drinking water in sufficient quantity to harm human health. And maybe those impacts are limited to a distance of 1000 linear feet from the frac job. Is this an acceptable rate of contamination? My guess is this type of result would result in outright frac bans in some areas, and extensive testing in others. Maybe the rate is 1 in 25,000 fracs (0.004%) cause contamination. To detect and actually quantify that rate of impact would require a truly massive study, or would be missed by smaller studies.

If you change the question to “what percentage of oil and gas sites have some contamination detectable above background” and perform an adequate study, maybe you come to the conclusion that say 1 in 10 sites have some type of contamination. Further, suppose that 1 in 1000 have contamination at sufficient level to pose a threat to health or the environment. Either way, the push for regulation would increase.

If I were running things, I would suggest that API approach the USGS, and have the USGS implement a study with API funding looking only at chemical contamination of drinking water as a result of hydraulic fracturing.

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Permalink Reply by Steve P on November 30, 2010 at 18:13

dbob: nice analysis and approach. The only thing I could add is that such a study in the HS might not be persuasive or even relevant for other shale strata, so they might need to do multiple studies around the country.

Some federal laws (OSHA, Clean Air Act, etc.) but not all allow states to have their own enforcement regime. However, various federal agencies have also threatened to stip states of their authority to do that if the feds feel tha the states are not doing an adequate job of monitoring and enforcement. So that's not a panacea.

I heard a presentation last week from a member of the National Academy of Sciences regarding the BP Gulf explosion, and in response to a question from the audience (mostly scientists except for me) about fracing and ground water from horizonal wells drilled in shale, he opined that there was little likelihood for contamination from fracing fluids EXCEPT from spills on the surface making its way back down the outside of the well bore. Too much rock between the down-hole fracing and the ground water, but that same ground water is suseptable to contamination from activities at the well pad. That has little to do with fracing.

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Permalink Reply by Les Bamburg on November 30, 2010 at 18:43

Steve, interestingly most past ground water contamination incidents involved surface facilites such as pipeline compressor stations, gas processing plants and oil tank farms. The contamination happened many years ago before newer regulations were put in place.

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Permalink Reply by Steve P on November 30, 2010 at 19:38

Well, his point was that there was very little risk of contamination from down-hole fracing for the HS; he wasn't saying that there was a big risk from surface contamination. He served on the National Academy panel that investigated the BP Deep Water Horizon explosion.

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