Chesapeake Resumes Fracking After Marcellus Mishap

Despite its relative benefits as a fuel source, obtaining natural gas through "fracking," is increasingly the object of public and environmental concern and academic studies, a trend that I'm convinced will only increase in the months and years ahead.

Scientists at Duke University have completed a Marcellus shale study that they maintain demonstrates that natural gas drilling can permit methane to migrate into a portion of the nearby water wells. Companies drilling in various parts of the formation, which lies largely beneath the surface of New York, Pennsylvania, and West Virginia, include Anadarko (NYSE: APC  ) , EOG Resources (NYSE: EOG  ) , Cabot Oil & Gas (NYSE: COG  ) , and EQT (NYSE: EQT  ) .

According to the study, 60 wells were tested in two states -- a statistically small number, it would seem. The results indicated that wells that were located in close proximity to gas drilling had methane levels 17 times higher than those that were not near drilling sites.

Of the wells tested, 26 were within one kilometer of gas wells, while the rest were farther from the active drilling. According to the researchers, while methane, which can be highly explosive, showed up in most of the water wells tested, the 26 close-in wells demonstrated far higher levels of the hydrocarbon. However, there was no evidence that chemicals used in fracking had leeched into the water supplies.

The Duke results come hard on the heels of a Cornell University contamination study from last month. According to the leader of that study, "[I]f you do an integration of 20 years following the development of the gas, shale gas is worse than conventional gas and is, in fact, worse than coal and worse than oil." I'm willing to wager that the coming months and years will bring about a plethora of research into the environmental effects of obtaining oil and gas from shale formations.

Coincidentally, the data from the Cornell study were released as the attention of the Pennsylvania citizenry was riveted by an April well-control incident at a Chesapeake Energy (NYSE: CHK  ) drilling site in Bradford County. The company apparently lost control of a well that was being drilled in the northeastern part of the state, causing a spill into a small pond and nearby stream.

The proximate cause of the mishap apparently was a faulty flange connection at the wellhead, which the company said had not occurred in the 15,000 wells it has completed. While the company's fracking operations in Pennsylvania were suspended during an investigation of the spill, they were resumed late last week.

So while Chesapeake is back to normal, the environmental studies likely are only beginning to proliferate in the U.S. and overseas. Nevertheless, given my positive feeling abut Chesapeake, I'm suggesting that Fools monitor the active and compelling company by placing it on My Watchlist, our free stock tracking service.

Motley Fool newsletter services have recommended Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor David Lee Smith doesn't own shares in any of the above-named companies. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 18, 2011, at 10:21 AM, VAppalachia wrote:

    Thank you Mr. Smith, for bringing to your readers' attention the need to monitor the safety performance of natural gas companies working in the Marcellus shale. You rightly note that "'fracking,' is increasingly the object of public and environmental concern and academic studies, a trend that I'm convinced will only increase...".

    I hope potential investors make note every time they see the expensive ad TV campaigns mounted by ANGA, Chevron, Exxon, and other shale gas "players" how much of their investments are going to image enhancement, which will only increase as more documented cases of contamination and negative impacts arise.

    Also, as more cases of well contamination are confirmed, I hope your investment-minded readers will consider what the loss of running water in a home or business means to the value of that property.

    If sizable areas of a rural county become uninhabitable because homes there no longer have a safe, viable water supply, what does that mean for the tax base of that county and state? Real estate values on a single rural property can go from 6 figures to nearly nothing, save for the value of mineral rights, which generate only a front-loaded, boom-bust income. Maybe when local, state and national leaders acknowledge this reality, we can begin a sensible discussion of what gas drilling really does for the economy.

  • Report this Comment On May 18, 2011, at 12:38 PM, trin6810 wrote:

    Even Texas has had enough - looming public health issues - how much water can they destroy before it matters - Pennsylvania waking up to nightmare of industrialization of there rural areas - letting them drill in the NYC watershed - what kind of cost is that if they screw it up - they haven't been able to "fix" anything yet - just stone wall it.

  • Report this Comment On May 18, 2011, at 3:25 PM, 123spot wrote:

    Look at GSFVF--gasfrac, Canadian co. using gelled propane instead of water for fracking. They recapture and recycle the propane. Robotic control allows workers the protection of working remotely. No water hauling, water use, well contamination. Would love to have the gas and save our water, too. Disclosure--long Gasfrac, small amt. just to encourage this kind of technological attention to environmentally safe growth.

  • Report this Comment On May 23, 2011, at 1:39 AM, chaz572 wrote:

    Actually, I'm looking for a nice orderly exit from my CHK position sometime over the next few weeks. Now that I've voted my shares in the company, I'm sick of how crazy much they're paying their CEO and what they let him get away with. There are other gas E&P's with lower cost of production and more reasonable executive pay out there. I'm swapping my CHK for one of them.

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