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Marcellus Shale: One Study Goes Beyond the Hype

A recent study that looks at the environmental and regulatory issues surrounding Marcellus Shale gas is a refreshing change of pace from the attacks and emotionally charged analyses.

Frac Attack: Risks, Hype, and Financial Reality of Hydraulic Fracturing in the Shale Plays looks at the future Marcellus Shale development and makes some interesting predictions:

  • A federal or New York state drilling ban is unlikely, while a ban is Pennsylvania is highly unlikely given the state’s reliance on state land leases to partially fund this year’s budget.
  • In wake of the BP oil spill, new regulation is likely; however, the authors doubt Congress will move before the new EPA study on fracing is completed sometime in 2012.
  • Compliance and environmental costs will increase for drillers regardless of regulation, since many are attempting to preempt future regulation by improving practices.
    • Without federal regulation, this could add $200,000 to $500,000 per well. With federal regulation, an additional $125,000 to $250,000 on top of that is likely.
  • The EPA study will most likely focus on health risks from sloppy drilling procedures.
  • Environmental opposition will continue to escalate because:

    Wide scale adoption of newly abundant, cheap natural gas throws off a mass embrace of renewable energy for a generation. Even if attacking gas means a short‐term win for coal and foreign energy, environmentalists’ longer‐term agenda is weaning the country off fossil fuels.

The study also narrows in on Pennsylvania suggesting:

  • Leakage from poorly cemented casing when drillers hit shallow gas zones is a significant problem, and more companies now test for methane in water before they drill. Some companies estimate methane is already in 20% of water wells.
  • In North Central and Southwest PA, permitting by the Susquehanna River Basin Commission
    has gotten faster and more efficient. In fact, is now able to scrutinize permits more carefully without long delays.
  • Unfortunately, the situation is very different in Northeast PA, where drilling is at a standstill. The Delaware River Basin Commission is holding up all new permits in Northeastern Pennsylvania while it reviews its regulations on fracing. The DRBC expects to have draft regulations out by summer’s end, but given the review period, 2010 drilling is highly unlikely.

Finally, the report compiles a list of the major studies used on both sides of the debate, and identifies 13 major incidents of contamination linked (or at least claimed to be linked) to Marcellus drilling.

Important here is the distinction between contamination from hydraulic fracturing (which has never occurred, according to the EPA and state environmental agencies) and preexisting contamination from methane or spills and accidents on the surface. The later two are often what opponents mistakenly ascribe to the hydraulic fracturing process.