A Class Act in Shale Gas

Water contamination fears have plagued the shale gas scene, particularly in the Marcellus shale, for more than a year now. As if low gas prices weren't enough of a drag, these concerns have arguably hurt the share prices of companies like Cabot Oil & Gas (NYSE: COG  ) and Southwestern Energy (NYSE: SWN  ) .

One of the biggest sources of anxiety is the lack of public disclosure surrounding the identity and quantity of chemicals that are added to so-called "frac fluid," which is mostly water and sand. I've been an advocate of better disclosure since at least last August. The operators and service companies need to do this to head off moratoria and onerous regulation.

Companies ranging from Chesapeake Energy (NYSE: CHK  ) to ExxonMobil (NYSE: XOM  ) have expressed support for better frac fluid disclosure. Range Resources (NYSE: RRC  ) , the original Marcellus shale sleuth, has now gone far beyond any other company in this regard.

On Wednesday morning, Range announced that it will be making available a thorough accounting of frac fluid additives at each individual well site, to both the state regulator and the general public. An example is posted on the company's website.

There's been some reluctance among big service providers like Halliburton (NYSE: HAL  ) to reveal their exact fluid formulations, but I think it's become plain enough to everyone that the business risk of drilling bans far outweigh those of decreased trade secret protection. Range couldn't have taken this step without the consent of its well completion contractors, after all.

I doff my jester's cap to this drilling outfit for taking the lead in this important transparency push.

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. Chesapeake is an Inside Value selection. The Fool owns shares of Chesapeake. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (10)

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  • Report this Comment On July 16, 2010, at 3:16 PM, susan400 wrote:

    Toby- SWN’s Marcellus amounts to about 3% of its NAV. Cabot has messed up, the issue didn’t hurt its price, it hut itself. 2) A hurt stock price is a good thing, most of us are not 95 with the reaper at the door. Disclosing chems doesn’t do anything, it isn’t hidden to start with. The industry produces too much gas, .

  • Report this Comment On July 19, 2010, at 12:04 PM, carbonates wrote:

    The Delaware River Basin Commission issued a moratorium on drilling earlier this year that affects much of eastern Pennsylvania, including some of the hot parts of the Marcellus play. It could last the rest of this year or longer. I would be concerned if I owned stock in any company that had a major position in that area, as leases are on a time-clock and in many cases could expire before they can be drilled. (full disclosure: I own no stock in any of the companies mentioned in this article)

    I support the disclosure. Material Safety Data Sheets (containing risk warnings and remediation instructions) are required to be on every drilling site for every chemical anyway, and there is no good reason this can't be public. Most of these chemicals can be found in the average household in small quantities, but because few people recognize the chemical names of common substances they tend to overreact to the "danger" posed by chemicals they themselves use frequently. I don't believe the "trade secret" issue is valid, as I could analyze all competitors fluids if I wanted There are no secrets.

  • Report this Comment On July 20, 2010, at 4:45 PM, MarcellusShale wrote:

    Before you put Range on too high of a pedestal, look into their two fish kills within five months of each other in Washington County Pennsylvania last year, with the second spill/kill costly them a $141K fine.

  • Report this Comment On August 23, 2010, at 12:14 PM, BobFrappels wrote:

    There's a little company trading as IEVM that could be a game changer in this space. They manufacture an anolyte which was recently proven effective as a frac fluid and is completely safe. It is a certified green product. See this 8/18 press release.

    "LITTLE RIVER S.C., Aug 18, 2010 (BUSINESS WIRE) -- Integrated Environmental Technologies, Ltd. (OTC:BB IEVM) announced today that Benchmark Performance Group, Inc. has taken delivery of ten (10) more of IET's EcaFlo(R) Model C-104 units. Benchmark is installing the equipment into its Regional Distribution Center ("RDC"), located in Millwood, West Virginia. This "RDC" will begin serving Benchmark's customer needs in the Marcellus Shale region...." See the press release for the full details. Very interesting.

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