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Opportunities and Risks in Drilling the Marcellus Shale

A recent television commercial features the CEO of a major energy company stating that a key component of America’s energy independence is “right below our feet.” The resource in question is natural gas, of which the U.S. has a number of unexploited reserves. The largest of these is the Marcellus Shale formation, and it is indeed right below our feet — many millions of our feet in fact, since it underlies one of the more densely populated regions of the North American continent. Getting at this reserve involves a process that many consider environmentally risky. This raises an obvious challenge: how does one drill for natural gas, not in some barren tundra or open prairie but instead among towns, neighborhoods, and farmland, in a way that economically benefits the region while avoiding ecological damage?

A Convenient Resource

The Marcellus Shale covers nearly 100,000 square miles of the northeastern U.S., stretching from north-central New York state south to Tennessee, and from the western Hudson Valley to Ohio. Collectively, the formation is estimated to contain up to 500 trillion cubic feet of natural gas. To access this resource, drillers use a process known as hydraulic fracturing (often called “fracking”). This entails pumping a mixture of water, sand, and chemicals into the shale, which fractures the rock to release the gas trapped inside.

This latter-day drilling boom has helped revitalize a number of economically challenged areas. For example, in one Pennsylvanian county, well-situated landowners can command $6000 per acre for the mineral rights on their properties. (Some in the gas drilling industry advocate “forced pooling,” which would give them the right to drill under and take gas from a property owner that has not signed a lease. However, Pennsylvania governor Tom Corbett and others oppose this concept.) Drilling has also created a number of jobs, restoring a certain measure of prosperity to a local economy still struggling to recover from its former reliance on (somewhat ironically) another indigenous energy resource, coal.

In addition, the Marcellus Shale could hardly be better placed from a transportation standpoint. A large percentage of the U.S. population lives on or within a few hundred miles of this formation, including major urban centers in the east and mid-east regions. Thus at least in theory, huge investments in transport infrastructure may not be required to connect this source of natural gas to its end users — a potential boon to suppliers.

Environmental Questions

Unfortunately, mining the Marcellus Shale has provoked vigorous and ongoing debate, much of it centered around ecological issues associated with the fracking extraction process. Criticism of fracking falls into two primary areas. One concerns the method itself, specifically the chemicals used with the water/sand mix. These include benzene, salt, and other volatile organic chemicals, many which are hazardous and toxic. According to some environmental groups, these liquids can contaminate surface water, either through accidental spills or through runoff. Others contend that fracking liquid injected into the shale itself can pollute aquifers, although mining companies contend that chemicals injected into bedrock thousands of feet underground are unlikely to affect drinking water from sources much closer to the surface.

The second concern with fracking involves the byproducts it releases. The organic-rich shale also contains materials other than natural gas, including metals that are toxic and in some cases radioactive. Some environmentalists consider fracking runoff so dangerous, they call for it to be treated as industrial hazardous waste. Instead, runoff has been typically pumped into drying pools, or into the local municipality’s wastewater treatment facility. In addition, many report that well water adjacent to drilling sites contains unacceptably high levels of methane, rendering the water at best undrinkable and at worst dangerous as a potential fire and/or asphyxiation risk.

Recently, the EPA directed the six most active natural gas drillers in Pennsylvania to disclose their plans for treating fracking wastewater after state regulators gave the drillers until May 19, 2011 to voluntarily stop bringing fracking waste to treatment plants that cannot properly remove the contaminants it contains. The state also recently fined Chesapeake Energy $1.1 million, the largest it has ever imposed against companies drilling in the Marcellus Shale, for contaminating well water and other violations.

Researchers are currently investigating ways to make fracking less environmentally damaging. For instance, in Texas a method has been tested in which a liquefied petroleum gas gel was used in place of water. This liquid can then be pumped back out with the extracted natural gas, resulting in near 100% recovery and essentially eliminating wastewater runoff. However, until such methods are developed on industrial-level scales, current water-based fracking techniques will likely remain the extraction methods of choice.

American energy independence is a critically important — if currently elusive — long term goal. Most would probably agree that renewable, green sources of energy would be the ideal way to meet this goal. At the same time, we must acknowledge that the development of these technologies, on a scale large enough to satisfy the needs of the nation, remains years or even decades in the future. In the interim, we will look to exploit the resources we have, including natural gas reserves. But in the case of the Marcellus Shale, where the resource underlies populated areas, full development is likely to be hindered by a certain level of NIMBY-inspired opposition. Combined with the serious environmental concerns associated with extraction methods such as fracking, this will likely have a dampening effect on what might otherwise be a very significant commercial opportunity.

Dick McCarrick is an analyst with Foresight Science & Technology.

Dick McCarrick
Dick McCarrick is an analyst with Foresight Science & Technology.
 
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8 thoughts on “Opportunities and Risks in Drilling the Marcellus Shale

  1. You missed a very key risk issue: How much methane is lost thru fugitive and leaks and esp at start up? So far the numbers are based on estimates NOT real data. Prof Howarth at Cornell feels these emissions are very large. So industry needs to obtain real numbers. When will this happen?

  2. Fracking with propane is being done on an industrial scale by the Canadian firm Gasfrac in Alberta, North Dakota and Pennsylvaia as well as in Texas. They are generating revenues of about $250 million in 2010 which is industrial scale to me.

  3. “Researchers are currently investigating ways to make fracking less environmentally damaging. For instance, in Texas a method has been tested in which a liquefied petroleum gas gel was used in place of water”.

    Gasfrac, a Candian oil service company has benn fracking with propane for five years in Alberta. It has fracking hundreds of wells in Alberta and dozens in the states of Texas, Penssylvania and North Dakota.

  4. Gasfrac has orders for $250 million for 2011 operations and $500 million for 2012 operations. This seems to me to be industrial scale.

  5. I think an excellent followup story for you would be to report on the history and success of Gasfrac, with the theme being that there really are practical and efficient methods which are not only environmentally acceptable but also more profitable for the well owner, the best possible combination. This process is not being tested, it is being used. You might try Gasfrac.com as a start. I think you will also find that management personnel at Gasfrac will be open for interviews. Just a coincidence, but Gasfrac (GFS) was listed today on the Toronto Stock Exchange.

  6. From the sound of this article and comments, it looks like the PR firm for Gasfrac has teamed up with Mr. McCarrick to create a nice marketing opportunity for the company.

  7. Don I am inclined to agree with you. In the event a journalist is for hire then it is their responsibility to inform his readers of point in question.
    Fracking here, fracking there and no one wants to own up to responsibility when the water comes out of the faucet exploding.
    If it ever happens that fracking is widely permitted then I feel there should be traceable markers to distinguish – Who the culprit is!
    liquids and water is no exception, seek the pathway of least resistance. My ape brain can not wrap itself around the idea that these companies are pushing that they can use toxic chemicals and keep them at bay from the water supply. Sounds like a Pipe dream without the pipe.

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