Despite low natural gas prices there's still a whole lot of fracking going on as oil and liquids projects are picking up some of the slack. All of this domestically produced energy, which is impossible to produce without fracking, has the potential to fuel economic growth for decades to come. Unfortunately, fracking is not without its problems.
Even as cleaner burning natural gas is a better for our environment than coal, the process of getting it out of the ground is one that few environmentalists would approve. At issue is the massive amounts of water needed to complete the process, as well as the even more massive amounts of fresh water at risk if something goes wrong in the process. I'll leave those important freshwater concerns for another day, as today I want to take a look at all the water that's used in the process and what companies are doing with it.
You might be wondering how much water we're talking about here. According to CONSOL Energy (NYSE: CNX ) , it takes about 5.6 million gallons of water to drill and fracture one shale gas well. The company is also quick to point out that the average golf course runs through 19.3 million gallons of water in one month. That's still a lot of water no matter how you spin it, so what's the company doing to keep from wasting this vital resource?
The in-house solution
CONSOL actually has its own water operations to deal with its frack water. The company's CNX Water Assets subsidiary is being built to support both the treatment of water from its mining operations as well as water used in its fracking operations. The company owns and operates an advanced wastewater treatment plant and freshwater reserves. CONSOL plans to invest about $50 million to grow its water operations this year to ensure that its does its part in preserving this important resource.
CONSOL isn't alone in owning an in-house treatment solution. Marcellus peer Rex Energy (NASDAQ: REXX ) for example owns 80% of Water Solutions which serves, transports, treats, and disposes of freshwater and brine from its oil and gas drilling activities. The company also owns part of a water disposal well in Ohio for its Utica Shale development. While a small part of the company's overall operations, they are still vital in protecting our important water resources.
The list of companies with various in-house solutions goes on with Devon Energy (NYSE: DVN ) , which is joining the industry's commitment to conserving water while protecting this vital resource. In one example, the company has been able to reuse 126 million gallons of water in its Cana-Woodford Shale operations alone. I could go on, but I think you get the idea, most drillers have some sort of in-house water solution to both conserve and protect water.
The outsource solution
Because drilling is such a costly venture not all companies can afford to invest in an in-house solution; instead, they turn to other providers to transport, treat, and dispose of fracking water. One of the top outsourcing options is Heckmann (NASDAQOTH: NESC ) . The company offers drillers a complete system and its operations are spread across most of the top resource basins. It's also not as levered to natural gas as you might think: 70% of its revenue is derived from oil and liquid activity. The company recently made a big acquisition, gaining a foothold in the Bakken Shale as it looks to become the name in treating frack water. Outsource players like Heckmann will be increasingly important to cash-strapped drillers.
My Foolish take
Water is such an important part of the fracking argument, just as its such a vital part of our daily lives. The story here is still developing and it's one that I think will be exciting to follow as more companies look to conserve water by treating and then reusing it. I'm most interested in Heckmann's story -- I think it is emerging as one of the big winners. I really like its Bakken buy and I think the market is missing the value here and punishing the company because the market sees Heckmann being too levered to natural gas which simply isn't the case.
Speaking of the Bakken, that's an exciting story in its own right. One story I'm following is Kodiak Oil & Gas which is such a dynamic growth story. However, with great opportunities come great risks so before you hitch your horse to this carriage let us help you with your due diligence. To see if Kodiak is currently a buy or sell, check out our new premium report, which comes with a year of timely updates and analysis.