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Can Shale Gas Go Green?

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Last summer, I asked whether investors should fear the FRAC Act. That's the piece of legislation seeking to subject the oil industry practice of hydraulic fracturing to federal oversight. This duty currently falls to the states.

Investors in companies like Range Resources (NYSE: RRC  ) and Devon Energy (NYSE: DVN  ) need to keep an eye on the battle over hydraulic fracturing because the process underpins the natural gas boom that is reshaping the energy landscape. Just a few years ago, it looked like imports of liquefied natural gas (LNG) would be required to supply North American energy needs. Now, with the market so well supplied with domestic output, companies like Apache (NYSE: APA  ) are looking to secure LNG export capacity. Frac fluid -- the water, sand, and chemical mixture blasted into downhole formations to get the gas flowing out of tight sandstones and shales -- made this possible.

There are two frac-related news items that I want to bring to your attention. The first is that the EPA has launched a comprehensive, peer-reviewed study "to investigate the potential adverse impact that hydraulic fracturing may have on water quality and public health." I am hopeful that this study will put some of the more alarmist concerns to bed, while perhaps cracking the whip on some chemical compounds that should be banned from frac fluids.

Speaking of which, the race by oil services companies to develop "green" -- i.e. nontoxic -- frac chemicals is well under way. A Bloomberg piece today highlights some efforts by Halliburton (NYSE: HAL  ) and Schlumberger (NYSE: SLB  ) to replace traditional biocides, which make up about 0.001% of a typical fracture fluid. Halliburton, for example, is attempting to use ultraviolet light to kill the bacteria that can muck up a gas well.

I remain confident that these companies can figure out ways around using the most offensive chemicals. The faster they implement these alternatives, the more likely they are to defuse opposition in frac battlegrounds like New York and Pennsylvania, and avoid unnecessary regulations. That should be a win-win for all stakeholders.

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Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool has a disclosure policy.


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  • Report this Comment On April 02, 2010, at 6:28 PM, Shalewatch wrote:

    Ok, so here's the problem. There are several of issues with shale gas fracking. You have the chemicals that are used, many of which are toxic. The cement casing that's supposed to protect the aquifer doesn't always hold - you've got fissures under the ground into which the cement can seep and the sheer amount of pressure under which the fracking mixture is pumped can crack the cement casing. A friend of mine had fracking done on her farm and the cement casing blew out. So, groundwater contamination is an issue. Of course it doesn't help that the gas company workers aren't particularly careful with where they dump the frack water - around here they've been seen dumping in streams, on roads - you get the picture. We just had a well fire the other day in a neighboring community. The frack pond caught fire and the liner of the pond was burnt away. This let enormous amounts of frack water seep into the soil, on its way to the groundwater.

    Gas companies will say that there is no confirmed case of water contamination. When the baseline tests that were done tested for e-coli and other bacteria, and the water shows up polluted with toluene and formaldehyde, they tell the residents that they can't prove that their well water wasn't always contaminated with toluene and formaldehyde.

    The other thing is that when the fracking is done, a lot of chemicals are released from underground - benzene, toluene, ethylene, xylene - two are carcinogens, two are neurotoxins. This comes up in the frack water, and it also comes up in the air. The airborne gases settle in low-lying areas which means that it's not uncommon for people to be "gassed" especially early in the morning when the air is cool and heavy and they're going in or out of their homes. The town of DISH, Texas - where a lot of drilling has been going on for a number of years - recently had a series of air tests run. The ambient air showed high levels of toxicity of methane and the BTEX chemicals listed above. Oh, and by the way, the Marcellus Shale is radioactive. Stimulation of the Marcellus prompts the release of radioactive materials up through the soil (& into the basements of homes above, if you're unfortunate enough for horizontal drilling to be going on under your home). Radioactivity also shows up in the frack water. A test done by the New York Dept. of Environmental Conservation showed concentrations of radium-226 at levels as high as 267 times the safe limit to be discharged into the environment, and thousands of times beyond the safe limit for human consumption.

    People who are concerned about shale gas drilling are not alarmist tree-huggers. They're people who like to breathe, and people who like to drink safe water. They're people who want their children to grow up and not suffer from leukemia or other diseases that are associated with long-term exposure to the BTEX chemicals.

    I believe that whatever position any of your readers begin from, if they were to live in a community where shale gas drilling is going on they would be horrified. They'd also want to sell their homes and move, and be pretty surprised when they find out that their homes and farms have no property value because of all the toxicity in the air, in the soil and in the water.

    This isn't a financial issue, folks. This has crossed the line into being a human rights issue. I would strongly urge those of you with investments in natural gas companies to do some pretty solid research on your own - don't buy what the gas companies tell you, learn for yourself. Then ask yourself if this is truly something you want to support.

    The crazy thing is that they can do this in a much more environmentally-sound way. They just choose not to.

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