With Texas' New Fracking Law, Squabbles Will Continue

As the home of a host of oil and gas producers from ExxonMobil (NYSE: XOM  ) on down, along with oilfield services stalwarts Halliburton (NYSE: HAL  ) and Baker Hughes (NYSE: BHI  ) , Texas has long set the tone for trends in the energy industry.

It's therefore more than a passing event that Texas Gov. Rick Perry (R) has now signed into law a bill requiring disclosure of the chemicals used in hydraulic fracturing fluids used largely in unconventional oil and gas plays. While Texas isn't the first state to enact such a law, its prominence in energy-related matters makes the step especially noteworthy and likely to be copied widely.

In the fracking process, once shale rock has been reached, typically by a combination of vertical and horizontal drilling, the shale is shattered by the force of millions of gallons of fluids that are blasted directly at it. The trapped natural gas, liquids, or oil are thereby allowed to escape through the resulting cracks and crevices for production by the well's operator.

The devil's in the details
The question addressed by the Texas bill and the handful of others that have preceded it concerns the nature of the chemicals used in the fracking fluids. While those chemicals make up a small portion of the total volume of the fluids, there nevertheless has been mounting concern among environmentalists and residents near fracking operations about the possibility of the chemicals seeping into drinking water. Until recently, companies generally treated the composition of their chemicals as a competitive secret, thereby setting up a standoff with those concerned about their environmental effects.

The companies have also maintained that properly structured wells preclude the possibility of leaking and environmental damage. Furthermore, they have contended accurately that, long before its substantially increased use in such newly active plays as the rapidly expanding Eagle Ford shale, along with the Haynesville, and Marcellus shales, fracking had been employed by the industry essentially without negative results.

Heeding the cacophony
But as the hue and cry from those opposed to the companies' secrecy escalated to a cacophony, increased numbers of industry leaders began to heed the message. For instance, Aubrey McClendon, co-founder and CEO of Chesapeake Energy (NYSE: CHK  ) , a leader in the discovery and development of a number of the nation's shale plays, affirmed something of a capitulation at his company's recent annual meeting. His stance was shared by the leadership of other active shale operators such as Range Resources (NYSE: RRC  ) and Anadarko Petroleum (NYSE: APC  ) .

In fact, a number of companies joined in communicating their backing of the disclosure bill to the state's legislators. And many of the major gas producers, including BP (NYSE: BP  ) , have also agreed to publicize the makeup of their chemicals online at FracFocus.org.

If you assume that passage of the Texas bill indicates that environmental concerns and contentiousness regarding the expanding fracking phenomenon are being obliterated, there are other issues that are apt to fan the flames in what is likely to be an ongoing squabble. For instance, a number of environmental groups, while viewing the Texas bill as a positive step, nevertheless maintain that it needs more teeth to properly address their concerns.

A gas in the Keystone State
At the same time, Pennsylvania's Department of Environmental Protection has apparently found methane, a highly flammable gas, in several wells near Lycoming County's Little Muncy Creek. The discovery has resulted in a shutdown of operations in the area by XTO Energy, which Exxon acquired last year. The state's DEP maintains that other instances of methane contamination have been discovered near Marcellus shale wells.

However, XTO contends that any existing methane is not the result of drilling and fracking. As a company spokesman said, "In general, the gas levels that were detected after drilling was completed were similar to the pre-drilling samples we studied." Obviously, even if high levels of methane exist at or near drilling sites, it doesn't represent a problem that can be solved by fracking chemicals disclosures.

Follow the flowback
In addition, the Pennsylvania DEP and the companies have been involved in a major debate over the handling of what is called "flowback water." The term refers to the relatively small amount of water -- typically about 10% of the total used in a fracking operation -- that eventually resurfaces, rather than remaining underground.

While flowback water has generally been disposed of in public sewage plants, the involved companies and the DEP agreed earlier this month that that approach would be discontinued in favor of dedicated treatment facilities, where the brine and other materials in the water can be properly removed. At this juncture, Pennsylvania is expected to open 25 such facilities, an approach that is being observed by neighboring Ohio.

Last but almost certainly not least is the issue of whether oversight of fracking will be left to the individual states or become subject to federal control. Texas wants a continuation of monitoring by the states. Indeed, as Elizabeth Ames Jones, chairman of the Texas Railroad Commission (the state's authority over oil and gas matters), said earlier this month at a U.S. Energy Department meeting in Washington, it would be "a big mistake" for federal regulators to claim authority over hydraulic fracturing.

Tell it like it is, Exxon
And so, despite Texas' shiny new bill, aspects of the squabbling about fracking are apt to continue for some time. In that connection, Exxon, now the largest U.S. gas producer, is preparing an advertising campaign to defend the safety of fracking. For my money, that planned campaign is appropriate. Continued contentiousness regarding fracking operations in our nation's shale plays could deter the likely emergence of natural gas as our key energy source.

So hats off to ExxonMobil. And given the company's new importance in natural gas -- along with its role in oil -- I suggest that we each ascertain that the industry's biggest member is included on our individualized versions of My Watchlist.

The Motley Fool owns shares of Range Resources. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy and Range Resources. 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 companies included in this article. The Motley Fool has a disclosure policy.    


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  • Report this Comment On June 22, 2011, at 12:48 PM, ETFsRule wrote:

    The problem is that these oil companies are so enormous and bloated that they end up including dozens of unnecessary chemicals in their formulations.

    The point of fracking is to pump a fluid into the ground at high pressure to crack some rocks. Simple enough.

    There is no need to include all these biocides, which quite literally are poisons that have nothing at all to do with the actual fracking.

    They use things like DBNPA ( http://en.wikipedia.org/wiki/DBNPA ), which according to its MSDS is not something I want in my water supply:

    "Causes severe skin burns and eye damage."

    Potential Health Effects

    Inhalation May be harmful if inhaled. Material is extremely destructive to the tissue of the mucous

    membranes and upper respiratory tract.

    Skin May be harmful if absorbed through skin. Causes skin burns.

    Eyes Causes eye burns.

    Ingestion May be harmful if swallowed. Causes burns.

    Exxon can use whatever spin they want, but the bottom line is, this isn't a PR issue. PR doesn't help when your digestive tract is being burned and corroded by toxic, poisonous chemicals.

    Just take them out of the formula.

  • Report this Comment On June 22, 2011, at 12:52 PM, DoctorLewis4 wrote:

    Gotta love XOM. Instead of spending millions seeking ways of making fracking safe they'd rather spend it on TV commercials that bitch about passing laws that protect the public. How about doing it right? Then NAT GAS can actually be the fuel of the future.

  • Report this Comment On June 22, 2011, at 1:35 PM, voelkels wrote:

    ETFsRule wrote “There is no need to include all these biocides, which quite literally are poisons that have nothing at all to do with the actual fracking.

    They use things like DBNPA ( http://en.wikipedia.org/wiki/DBNPA ), which according to its MSDS is not something I want in my water supply: . . . “

    As an engineer, I strongly disagree. A biocide is used so that the fluids pumped into the well do not contaminate the formation with sulfate reducing bacteria, which live without oxygen and produce hydrogen sulfide. Hydrogen sulfide is both corrosive to steal and is a deadly poisonous gas.

    If he would have read his reference which says “DBNPA or 2,2-dibromo-3-nitrilopropionamide is a quick-kill biocide that easily hydrolyzes under both acidic and alkaline conditions. It is preferred for its instability in water as it quickly kills and then quickly degrades to ammonia and bromine ions“, he would realize that the DBNPA would not be present in his (or anyone else’s ) water supply as it would have degraded to ammonia and bromine ions.

    C.J.V. - ex-chemist & retired petroleum engineer, me

  • Report this Comment On June 22, 2011, at 2:36 PM, trin6810 wrote:

    Lousy chemicals going in - worst problem coming up - Pa "asked" for gas drilling companies to voluntarily stop using municpal sewage treatment plants to treat their wastewater because people near and in Pittsburg tasted salt in their drinking water - that's right - nothing like a "salty taste to your drinking water" - the brine from the marcellus Shale is 10x salter than sea water - can;t wait to see how much it will cost to clean in those 25 plants you mentioned - lousy industry - public health issues catching up to them - XOM sjhould save their reputation - gas prices will stay low for foreseeable future - is the Methane in Lycoming County same as Duke University study of is this issue or is this another site where the water "has always been bad" If hydrofracking is so safe - where is industry study showing us - there is no such study for the obvious reason - bad practice allowed by Haliburton Loophole - industry cannot clean up after itself -

  • Report this Comment On June 22, 2011, at 4:43 PM, trin6810 wrote:

    From PA Newspaper - love last sentence - State environmental officials are investigating new instances of methane contaminating private residential water wells and bubbling up in a northern Pennsylvania stream near a Marcellus Shale natural gas drilling operation.

    The Department of Environmental Protection found the flammable gas in seven water wells in Lycoming County and gas bubbling into the nearby Little Muncy Creek, prompting XTO Energy Inc., a subsidiary of energy giant ExxonMobil Corp., to voluntarily stop operations in the county and provide the water well owners with bottled water for drinking.

    The company collected some data on the water wells before it began drilling and has given that information to the department, spokesman Dan Spadoni said Friday. However, he said the agency has not determined the source of the methane.

    "The investigation is complex and will take time to resolve," he told the Williamsport Sun-Gazette.

    Isotopic testing to determine the source of the methane -- whether it is from natural decomposition of living matter or likely from a shale formation -- could take two to four weeks, he said.

    Methane is not considered toxic to drink, but officials say it could ignite and explode if allowed to build up in an enclosed space.

    The homes are near Lairdsville. Investigators have not found methane building up in homes or harming aquatic life in the creek, Spadoni said.

    Fort Worth, Texas-based XTO Energy has vented the wells to prevent gas from building up and will screen other nearby homes and wells within 4,000 feet of its three well pads in the area, Spadoni said. XTO or a contractor connected water tankers to the homes with polluted well water, he said.

    Another DEP official, spokeswoman Katy Gresh, said the agency is investigating other instances of methane contamination in wells or waterways near Marcellus Shale drilling sites, but she said the agency couldn't disclose details because they are active investigations.

    Last month, the DEP fined Oklahoma City-based Chesapeake Energy Corp. more than $1 million in part for methane contaminating wells in nearby Bradford County, although Chesapeake did not assume blame for the methane contamination.

    In another case, Houston-based Cabot Oil & Gas Corp. agreed in December to pay residents of Dimock in Susquehanna County $4.1 million, install whole-house gas mitigation systems in 19 affected homes and pay DEP $500,000. The DEP accused Cabot of contaminating the wells with methane gas, but Cabot denied responsibility for the pollution.

    In Lycoming County, the DEP initially received a report of bubbling well water on May 17. The home is about 2,300 feet from a pad where XTO Energy has drilled and hydraulically fractured three wells, Spadoni said.

    The agency then received a report about bubbling water in the creek on June 9, he told the Sun-Gazette.

    XTO spokesman Jeffrey Neu said methane was in water samples the company collected within 4,000 feet of some of its Lycoming County well sites before it began drilling.

    "In general, the gas levels that were detected after drilling was completed were similar to the pre-drilling samples we studied," he said.

    However, Neu said he was unsure as to whether XTO took samples from water wells near the drilling site in question.

  • Report this Comment On June 22, 2011, at 5:00 PM, ETFsRule wrote:

    voelkels:

    You're absolutely right. But, I don't have time to research every single chemical used in fracking - not that I could anyway, because they haven't released their formulations.

    That was just one example: there is also evidence of them using benzene, diethylbenzene, dodecylbenzene, formamide, formaldehyde, 1,2-benzisothiazolin-3-one, dazomet, several different dioxins, etc.

    Bottom line: they should be prepared to defend the ecological effects of every single chemical they are using... many of which are shown in this study:

    http://www.dec.ny.gov/docs/materials_minerals_pdf/ogdsgeisch...

  • Report this Comment On June 22, 2011, at 5:59 PM, ETFsRule wrote:

    Also, the rate of hydrolysis of DBNPA is highly dependant on pH. At pH 7 it has a half life of 63 hours, but at pH 5 it has a half life of 67 hours. That's more than enough time to cause harm to people as well as the environment. Source:

    http://nepis.epa.gov/Exe/ZyPURL.cgi?Dockey=30006DIZ.txt

  • Report this Comment On June 22, 2011, at 9:54 PM, ETFsRule wrote:

    At pH 5 it has a half life of 67 DAYS, not hours. Page 14 of that document in case anyone cares.

    I need a proofreader.

  • Report this Comment On June 23, 2011, at 2:27 PM, voelkels wrote:

    Interesting statement “Pa "asked" for gas drilling companies to voluntarily stop using municpal sewage treatment plants to treat their wastewater because people near and in Pittsburg tasted salt in their drinking water - that's right - nothing like a "salty taste to your drinking water". If XOM’s water going into the sewage plant is contaminating the water supply, it sounds like the problem is the sewage plant, not XOM to me. What other stuff is the local sewage plant putting into the water supply, huuuggh?

    Also "the rate of hydrolysis of DBNPA is highly dependant on pH. At pH 7 it has a half life of 63 hours, but at pH 5 it has a half life of 67 hours. . .

    . . . At pH 5 it has a half life of 67 DAYS, not hours."

    If your water supply is at a pH of 5, you have other major problems, not just DBNPA, no! Our raw well water here at the house measures 5.4 or 5.3. I had to replace all the valves and faucets in the house after installing a lime filter downstream of the pressure tank. The water dripping in the bathroom sink actually etched the marble. The amount of copper in the water from the pipes was too high to measure with an aquarium test kit (something above 5.0 ppm). I didn’t try to measure the lead concentration from the brass fittings and pipe solder, I didn’t want to know, me.

    ;-)

    C.J.V. - the problem isn’t the chemical, it’s the concentration of that chemical

  • Report this Comment On June 23, 2011, at 6:11 PM, ETFsRule wrote:

    "the problem isn’t the chemical, it’s the concentration of that chemical "

    It depends what you're talking about. Obviously that's not the case with Persistent Organic Pollutants, bioaccumulators, etc. This includes some of the chemicals they are using (mainly the dioxins).

    Groundwater generally has a pH in the range of 6.0 - 8.5... so under normal conditions the DBNPA would probably stick around for at least a few weeks.

    But, who cares about getting poisoned for a few weeks if it means XOM gets to use a slightly cheaper biocide?

  • Report this Comment On June 24, 2011, at 8:39 PM, voelkels wrote:

    "the problem isn’t the chemical, it’s the concentration of that chemical "

    It depends what you're talking about.

    No, its the concentration of the chemical. If say I have an analysis done on my well water and it reads say 10 ppm arsenic, I would be in a panic. If it came in at 1 ppm, I would be concerned. Since I’m 68 years old and get most of my drinking water in those 12-ounce silver cans from Golden, Colorado, It probably won’t affect my health too much, no. If one of the grandkids were to move in with us, I’d have to do something about it, yes. If the arsenic level was measured at say 0.1 ppm, I wouldn’t worry about it even if one of the grandkids were to move in for a few weeks. At levels below 0.01 ppm, no problem. If the level were read at say 0.001 ppm, I’d question about the detection limits of their analysis, me.

    If you assume a point source of a chemical, say DBNPA, what is the dilution factor? Say XOM “leaks” 10% of their frac fluid containing say 3% DBNPA into your aquifer, say 100,000 barrels of fluid. If your well is 3000 feet away, what would the concentration of DBNPA in the water be and how long would it take to travel from XOM’s source to your well? If you could give me the acre-feet of the aquifer and its withdrawal rate, I could calculate it for you (yes, I did it for water flood projects back in the 80’s). The movement of underground fluids are very slow and the dilution rate is very large. Even without hydrolysis, the concentration would probably be less than 1.0 ppb by the time it gets to your well.

    Now then, assume that XOM doesn’t use a biocide and, in the rare event, your aquifer is contaminated with sulfate reducing bacteria (SRBs). The concentration of H2S in the water would increase over time, it would cost millions of dollars to treat the municipal water supply and the local population would be getting out their pitchforks and lighting torches on the way to XOM’s local office because “They Caused MY water to smell like rotten eggs and its eating the pipes, etc., etc. all because they saved a few dollars on biocides”.

    Instead of what XOM and the other oil & gas companies are using in their frac fluid, I’d be more worried about what the municipal water companies are putting in their water, me. Back about 25 or 24 years, the local water company in Jefferson Parish, Loosiana, switched from chlorine to chloramine (See; http://en.wikipedia.org/wiki/Chloramine) because it was safer for their people to handle and had a higher residual. Killed lots of aquarium fish and caused other problems, yes. Turned out it wasn’t that great but many municipal water companies are still using it. What about yours?

    C.J.V.

  • Report this Comment On June 26, 2011, at 9:37 AM, ETFsRule wrote:

    "No, its the concentration of the chemical."

    No, it depends what type of chemical you are talking about.

    Maybe you should read and understand the significance of persistent organic pollutants and bioaccumulators, before you ignore my point:

    http://en.wikipedia.org/wiki/Persistent_organic_pollutant

    http://en.wikipedia.org/wiki/Bioaccumulation

    The concentration doesn't matter, only your total lifetime exposure matters. Mercury is a perfect example: if you are exposed to mercury on a regular basis, even at low concentrations, it will accumulate in your body until it eventually reaches a point that is harmful.

    Many of the fracking chemicals accumulate in your body in this way - especially the dioxins, as I mentioned earlier.

    "Instead of what XOM and the other oil & gas companies are using in their frac fluid, I’d be more worried about what the municipal water companies are putting in their water, me."

    I respectfully disagree. When is the last time a municipal water company had a catastrophic accident that caused massive deaths & damage to the environment?

    Who has a better overall track record, them or the oil companies?

    I will put my trust with the water companies.

    Next, your calculations are merely estimates of "expected" or "normal" concentrations. I'm sure there are places where the underground waterways move at above-average speeds. We know from experience that things don't always go according to plan, and the oil companies don't have a great track record with regards to risk management.

    "Now then, assume that XOM doesn’t use a biocide..."

    No, let's assume that they use a safer biocide, even if it is slightly more expensive. There are effective biocides that represent no health or environmental hazards. ProClin, for instance:

    http://www.safcglobal.com/safc-supply-solutions/en-us/home/d...

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