0.15 Natural capital: energy  (Page 12/15)

Suppose U.S. shale deposits began to peter out after, say 2025 or 2030. Energy from shale deposits elsewhere in the world will likely continue to flow after 2030 even if fracking bans continue in France, Vermont and New York.

Consider the world map on shale plays.

At some point, China, Argentina, Libya, Brazil, Russia, Bolivia, and South Africa will begin exploiting their shale reserves with the help of foreign oil companies. This growing supply would mean that world energy prices would tend not to rise significantly over the long term, resulting in continued significant erosion of the Mid East and Russia in influence on energy.

Fracking and the environment

Exploitation of shale plays has not been without controversy. France banned fracking entirely in 2011. Now Jersey and Vermont banned it, even though they lack shale deposits. Other European nations were considering limits to fracking as well in 2014. In the U.S. in 2012 three towns in Colorado imposed a moratorium on fracking, as did North Caroline and New York. Thus far, no emerging nation has imposed bans or moratoriums on fracking. On the contrary, several, such as Argentina and Mexico in 2014 offered new incentives to foreign drillers to enter their shale plays.

It helps to understand directional drilling and fracking if one knows that the success of these technologies is heavily based on information technology (IT), with very advanced graphics.

Those countries besides the U.S. having shale formations that bear oil or gas (see Figure 15-6) include Brazil, Ecuador, Poland, China, Russia and Colombia etc. Argentina has huge hydrocarbon reserves in the oil shale formation called Vaca Muerte (Dead Cow).

Fracking has vastly increased proven worldwide reserves of oil and gas. Before horizontal drilling and fracking, hydrocarbons locked up in shale were much too expensive to extract. But there is a price to be paid: the effects of fracking on the environment.

Up to now, virtually all experience with fracking has been in the U.S. Over the past 25 years fracking has been employed in tens of thousands of wells across the country.

What is the environmental record and environmental lessons so far? There are six main issues.

1. Stress on Water Supplies
   The first issue involves the very large amounts of water that must be used in fracking operations. Water requirements for fracking vary according to location. But a good illustration is that of the Eagle Ford Shale formation in South Texas. There an average of 4.5 million gallons of water are required to fracture each well. In areas of plentiful water supplies, this may not be a serious problem. But many shale formations lie in areas of moderate to severe stress on water supplies. This is especially so for Chinese and Mexican shale formations. This is a serious issue in a world faced with growing scarcity of fresh water supplies (see Chapter 19).
2. Possible water table contamination from fracking (drinking water)
   Shale deposits typically lie between 7,000 and 12,000 feet or more below the surface. The water table anywhere is rarely deeper than 2,000 feet at most. How then, could contamination of water tables result from fracking, since the water table is ordinarily so far above the shale deposit?
   Again, fracturing involves pumping downwell a mixture of water , sand and chemicals under high pressure into deep rock formations as much as 2 miles underground. The frac fluid is 99.5% water and sand. The rest consists of detergents and chemical proppants.
   We have seen that fracking creates fissures in the rock, so that hydrocarbons (gas, oil or both) flow to the wallstring. Diesel fuel was once used as part of frac fluid, but no more except for some fly-by night firms.
   Shale gas wells are first drilled vertically from the surface, to just above the shale formation. During the drilling of the vertical part of the well, a series of steel casings are put into place and cemented in order to protect fresh water aquifer thousands of feet above the well.

   

   
   Then, because the drilling pipe is flexible it can bend and go horizontally into the formations. The horizontal portion is ordinarily not cemented, but is encased in flexible metal coil casings. Once the horizontal portion is in place, the well operator perforates the horizontal casing using shaped charges (armor piercing technology). This allows (after pumping in of water) the hydrocarbon to flow into the casing then is pumped up to the surface.
   In August 2011 report of Secretary Chu of the Energy Department concludes that with fracking done this way, at such great depths:
   “The risk of fracturing fluid leaking into drinking water sources is remote .”
   However, the report fails to stress that there are some regions where fracking could contaminate drinking water, or even introduce methane into drinking water.
   There are locations where old wells drilled under earlier technology have been improperly completed, where the requisite steel pipe and cementing was not used. Such wells are not uncommon in West Virginia and Pennsylvania. In such areas, fracking can cause methane or other contaminants to migrate to the old wells and then contaminate the water table. These old wells were primarily drilled into parts of West Virginia and Pennsylvania in 50’s and 60’s. So, the solution is clearly:
   Don’t Frack There! Or frack there very selectively.
3. Mild Earthquakes from Fracking
   Small earthquakes, at 2-3 on the Richter Scale have been reported in some areas such as Youngstown Ohio, where fracking has been going on for some time.
   It is now clear that these quakes are not due to fracking but to either reinjection of CO2 in underground formations (sequestrations) or due to reinjection of produced water into the ground, especially through old wells. Also, some areas such as Clinton, Michigan have experienced a series of similar earthquakes where no fracking is underway.
4. Disposal of Produced Water Used in Fracking
   The most significant environmental issue associated with fracking is what to do with the “produced” water used in fracking. Substantial amounts of water are injected into the wells along with proppants such as sand.
   Much of this water returns to the surface with the oil or gas coming to the wellhead. In some mature fields produced water can be 10-20 times the oil produced. Sometimes this “produced” water contains contaminates (heavy metals, radioactive particles).
   In Texas, 80% of water is used for agriculture. The amount of water needed to drill and frack a well is about what is required to grow 10 acres of irrigated corn. Moreover, the produced water can be recycled and treated. There are now many technologies available to do this. At least 4 such technologies were being developed at Rice University alone in 2013-2014. Already, recent technological development has allowed shale oil producers to reuse and recycle. For example, in Pennsylvania about 89% of water used in fracking processes is reused or recycled. The 2014 Texas Water Summit Report, Austin, p.52.
   At least in the U.S., there is sufficient oil and gas in shale to allow the nation to be energy independent at least through 2025. Therefore, it should not be difficult just to place all environmentally sensitive areas off limits to fracking activity.
5. Impact of Fracking Activities on Road and Highways
   Fracking requires the use of heavy equipment such as these carrying pressure pumps. And as we have seen, heavy trucks carrying heavy loads of sand and water are needed for firms to conduct fracking opportunities.
   The result in regions where substantial shale deposits are present is serious damage to roads and highways. This has been especially apparent in the Eagle Ford Formation in South Texas. There many roads and highways are in serious disrepair because of very heavy traffic of very heavy vehicles.
   Good resource allocation policy would require that road user charges should at least cover the marginal cost (MC) of road use. However, the only significant road user charges (in Texas and in other States) are federal and state taxes on diesel fuel and gasoline (see Chapter 19, where these taxes are discussed in greater detail).
   The revenues from these road user charges flow into highway trust funds that are intended to be used for maintenance and repair of existing roads and expansion of the highway network. However, the proceeds from diesel fuel and gasoline taxes fell far short of sufficiency for either road repair or construction. This is particularly critical in such regions as South Texas, where road damage from fracking operations has been severe. The obvious, and sensible remedy for this problem would be an increase in road user charges to cover the full costs of road user, including those for maintenance and repair.
   
6. Intrusiveness of Fracking Operations Near Urban Areas
   In some states the shale boom began in 2005-06. According to the Wall Street Journal, at least. 15.3 million Americans now live close by a well that has been drilled recently. So now many people have oil well pads virtually in their backgrounds.
   This pattern is especially marked in Texas, where fracking operations have been substantial in three principal areas: the Eagle Ford Formation (27 counties in South Texas), the Permian Basin in West Central Texas, and the Barnett shale near Fort Worth. Population living within one mile of well drilled since 2000 totals 6 million out of about 21 million Texans.
   Is this a problem? It depends. On the one hand, in such states as Texas, North Dakota and Pennsylvania, tens of thousands of new jobs have been created in these areas. And many landowners who have leased mineral rights to all companies are now multi- millionaires.

   

   
   On the other hand, these operations often involve problems. One is severe road congestion. Drilling and fracking a single well may involve more than 1,000 trips by very heavy trucks to haul workers sand and water. This results in heavy wear and tear on the roads near the Eagle Ford Formation area in South Texas and the Permian basin in Central Texas.
   A second problem is that an increasing number of wells are within one mile of population centers, bringing air pollution and congestion.
   Consider the Barnett Shale Formation near urban Ft. Worth. As recently as 2002, only 44 wells were horizontally drilled there. By 2006 there were 1209 horizontal wells in the area.
   However, this issue is unlikely to be nearly as significant in low income emerging nations seeking to exploit their shale deposits. In Argentina, China, Brazil, Mexico, South Africa and Northern Africa, the shale deposits are typically not close by major urban centers (see Figure 15-8 ). Instead, lack of plentiful water for fracking and lack of domestic technology in drilling are the more important limitations on exploitation of shale for oil and gas.