Drilling Tactic Unleashes a Trove Of Natural Gas—And a Backlash
Wall Street Journal
21 January 2010
By Ben Casselman and Russell Gold
SHREVEPORT, La.—A mounting backlash against a technique used in
natural-gas drilling is threatening to slow development of the huge gas
fields that some hope will reduce U.S. dependence on foreign oil and
polluting coal.
The U.S. energy industry says there is enough untapped domestic natural
gas to last a century—but getting to that gas requires injecting
millions of gallons of water into the ground to crack open the dense
rocks holding the deposits. The process, known as hydraulic fracturing,
has turned gas deposits in shale formations into an energy bonanza.
The industry's success has triggered increasing debate over whether the
drilling process could pollute freshwater supplies. Federal and state
authorities are considering action that could regulate hydraulic
fracturing, potentially making drilling less profitable and giving
companies less reason to tap into this ample supply of natural gas.
Exxon Mobil Corp. placed itself squarely in the middle of the wrangling
when it agreed last month to acquire gas producer XTO Energy Inc., a
fracturing pioneer, in a deal now valued at $29 billion. Wary of the
rising outcry, Exxon negotiated the right to back out of its deal if
Congress passes a law to make hydraulic fracturing illegal or
"commercially impracticable."
On Wednesday, Exxon Chairman and Chief Executive Rex Tillerson faced
questions about the environmental impact of hydraulic fracturing at a
Capitol Hill hearing on the merger.
"We can now find and produce unconventional natural-gas supplies miles
below the surface in a safe, efficient and environmentally responsible
manner," Mr. Tillerson told members of the House Energy and Commerce
Committee.
Criticism of hydraulic fracturing was muted at the hearing, with most
representatives focusing on the potential benefits of increased gas
use. But the merger has given drilling opponents a new target.
"It puts Exxon at front and center of this whole issue," said Michael
Passoff, associate director of As You Sow, an environmental-minded
investment group.
Even before the Exxon-XTO deal, the controversy over hydraulic
fracturing, also known as "fracking" or "fracing," was growing.
Oilmen were injecting water into wells to free up valuable oil and gas
as far back as the 1940s. But in the past decade the technique has
really taken off. First in East Texas and in the outskirts of Fort
Worth, companies began pumping water under enormous pressure to see if
they could break open dense shale-rock formations to release gas.
These initial efforts were largely welcomed by communities, with
homeowners and landlords often receiving lucrative checks for the
mineral rights that allowed companies to drill on their land.
When early efforts succeeded, the companies began running bigger
fracturing jobs, using more water and higher pressure—and in turn
searching for even more gas-bearing shale deposits.
This took the gas industry into places where drilling was less common
in modern times, including downtown Fort Worth, northeastern
Pennsylvania and within the city limits of Shreveport, La.
Hydraulic fracturing and some other technology improvements have
created a way to tap a domestic fuel source that has proved abundant.
U.S. natural-gas production has risen about 20% since 2005 in large
part because of these developments, making gas a much bigger player in
energy-policy planning.
Natural gas heats more than half of U.S. homes and generates a fifth of
America's electricity, far less than coal, which provides the U.S. with
nearly half its power.
The industry and its allies are promoting natural gas a bridge fuel to
help wean the U.S. off coal, which emits more global-warming gases, and
imported oil until renewable fuels are able to meet the demand.
What most worries environmentalists isn't the water in the fracturing
process—it's the chemicals mixed in the water to reduce friction, kill
bacteria and prevent mineral buildup. The chemicals make up less than
1% of the overall solution, but some are hazardous in low
concentrations.
Today, the industry estimates that 90% of all new gas wells are
fractured. Shale—a dense, nonporous gas-bearing rock—won't release its
gas unless it is cracked open, and other types of formations also
produce more gas when fractured. Easier, more porous formations, which
don't require fracturing, were tapped in earlier decades and have
largely dried up.
As the industry has honed its techniques, hydraulic-fracturing
operations have become more complex, requiring far more water and
chemicals—millions of gallons per well, rather than tens or hundreds of
thousands of gallons in the past.
Environmentalists and some community activists fear hydraulic
fracturing could contaminate drinking-water supplies. They point to
recent incidents that they say are linked to fracturing, including a
water-well explosion in Dimock, Pa., and a chemical spill here in
Shreveport.
The industry says fracturing is safe and argues that there have been
only a handful of incidents among the large number of wells that have
been fractured over the past 50 years. "Hydraulic fracturing has been
used since the 1940s in more than one million wells in the United
States. It's safe and effective," says Exxon spokeswoman Cynthia
Bergman.
Even if the industry can make its case, it still must deal with the
public-relations and political fallout from some of the questionable
incidents.
On a recent Friday morning, a crew from Cudd Energy Services worked to
fracture a Chesapeake Energy Corp. well in Caddo Parish, La., the heart
of the Haynesville Shale gas field. While cattle chewed grass in a
field across the street, a team of Chesapeake and Cudd employees
monitored computer readouts as 21 diesel-powered pumps forced nearly
3,800 gallons of water a minute down a well that reached two miles into
the earth.
It is a process Chesapeake says it has learned how to do both
efficiently and safely. "We've done it 10,000 times in the company's
history without incident," said Aubrey McClendon, Chesapeake's chairman
and chief executive officer, in a separate interview.
But in a coffee shop in nearby Shreveport, Caddo Parish Commissioner
Matthew Linn said he had concerns after more than a dozen cows died
during a Chesapeake Energy fracturing operation last year. A
preliminary investigation linked the deaths to chemicals that spilled
off the well site into a nearby pasture. A Chesapeake spokesman says
the company compensated the cattle's owner and has taken steps to
prevent a similar incident in the future.
"I'm all for drilling, and I want to get the gas out from underneath
us," Mr. Linn said. "But at the same time, how do you balance human
life and quality of life and clean water against that?"
Natural-gas companies say what's at work is fear of the new. "When you
introduce something like hydraulic fracturing in a part of the country
that hasn't had any experience with it, I think it's natural for there
to be questions about the procedure," says Mr. McClendon.
Regardless, the industry faces a real prospect of tightened rules that
could make it harder, or impractical, to use hydraulic fracturing. In
June, congressional Democrats introduced legislation that would
regulate fracturing at the federal level for the first time. The bills
remain in committee. In October, the house formally asked the
Environmental Protection Agency to study the risks posed by fracturing.
Several states, including Colorado, Pennsylvania and New York, have
either passed or are considering tightening regulations on fracturing
and related activities.
Members of the House of Representatives pushing for new legislation
argue that federal oversight is needed to protect water supplies
because state regulations vary widely.
The industry worries that new regulations would hurt the thin margins
on many gas wells and cut the financial incentive to tap the U.S.'s
vast supply of gas. "There is an anticipation that more federal
oversight would add enough costs to make it uneconomical, even it
wasn't outright prohibited," said Gary Adams, vice chairman of Deloitte
LLP's oil and gas consulting division.
Already, the growing concerns about the practice are causing some
companies to rethink where they drill. Chesapeake last fall publicly
abandoned plans to drill in the watershed that provides New York City
with its drinking water after opposition from city officials and others
who feared a spill could contaminate the water.
Talisman Energy Inc. says it is shifting its drilling effort away from
New York because of regulatory challenges there.
There have been attempts to regulate fracturing before. The 1974 Safe
Water Drinking Act regulated wells that injected liquids underground.
The federal courts ruled the law covered fracturing in a 1990s lawsuit
from Alabama. But the technique was exempted from federal oversight in
the 2005 Energy Bill.
Some argue there is little really known about whether fracturing poses
a genuine risk to water supplies. Hannah Wiseman, a visiting law
professor at the University of Texas, Austin, says tighter regulation
may be warranted. "There just isn't enough information out there right
now about the effects," she said.
Some of the potential threats are clearer than others, however.
Gas-bearing shale formations typically lie a mile or more below the
surface, with thousands of feet of nonporous rock separating them from
even the deepest freshwater aquifers.
Most people agree that means that if a fracturing job is done
correctly, it would be virtually impossible for water or chemicals to
seep upward into drinking water supplies.
The industry argues that there has never been a proven case of water
contamination caused by fracturing. But regulators have tied multiple
incidents to oil and gas drilling more generally. Environmental groups
point out that wells aren't always constructed properly. Moreover, they
say, storage ponds that hold chemical-laced water after fracturing is
complete can overflow, and trucks carrying chemicals can crash.
A poorly sealed well is the alleged cause of gas escaping into an
underground aquifer in Dimock, Pa. Gas also built up in one resident's
water well, causing an explosion in January 2009.
The company that drilled the wells, Cabot Oil & Gas, paid a
$120,000 fine to settle the matter with the state, but has denied
responsibility for the contamination and says fracturing couldn't have
been the cause.
"I could never sell this house now," said Dimock resident Craig
Sautner, who now has drinking water shipped to him by Cabot. "Our
pristine water that we used to have? It's done."
Whether it is the act of fracturing itself or the risk of contamination
from related activities is somewhat beside the point, says Amy Mall, a
senior policy analyst for the Natural Resources Defense Council, an
environmental group that has raised concerns about fracturing.
"Ultimately it's semantics. Somebody's water got contaminated," she
says.
Still, for Exxon, the hearings this week presented an opportunity to
highlight its investment in developing U.S. energy supplies and
creating jobs. Most of its investments in recent years have been
overseas. And Exxon executives usually face congressional grilling only
when oil and gasoline prices skyrocket.
"This should probably be a very pleasant change of pace for Exxon Mobil
because it's not going to be an argument about high oil and gasoline
prices," says William Hederman, an energy analyst with Washington
research firm Concept Capital.
—Siobhan Hughes contributed to this article.