Another Fishing Expedition on Fracking

If the EPA won't stop fracking, then maybe the Justice Department will step in and do the job for them. 

Baker Hughes (NYSE: BHI  ) and Halliburton (NYSE: HAL  ) , two of the three biggest companies involved in providing services for hydraulic fracturing, announced last week they received civil investigative demands, or CIDs, from Justice regarding a probe into alleged "anticompetitive practices involving pressure-pumping services performed on oil and gas wells."

CIDs require recipients to produce documents, respond to interrogatories, or provide sworn deposition testimony and are used by the government before litigation has actually commenced. The area Justice is investigating, pressure pumping, is the main step in the fracking process and involves injecting water, chemicals, and other fluids under high pressure into a well to fracture the rock formations trapping the oil and gas deposits. 

Once the rock is fractured, proppants, typically sand or ceramic beads, are then used to prop open the fissures (hence their name) to allow the gas and oil to flow freely.

It has been the development of the hydraulic fracturing process that has created the natural gas boom we're in the midst of. The U.S. is awash in natural gas and will soon become a major exporter through Cheneire Energy's (NYSEMKT: LNG  ) Sabine Pass facility in Louisiana.

Environmentalists have opposed fracking, however, accusing the procedure of causing everything from groundwater contamination to flaming faucets and earthquakes. Spurred on by these activists, the EPA began conducting tests to prove it was fracking behind drinking water contamination, as the theory was that fracking fluids were seeping into the aquifers. Yet as Nuverra Environmental Solutions  (NYSE: NES  ) explained, these fluids are pumped into wells thousands of feet below the ground, far below the aquifers, and the fluids seep down, not up. Nuverra is one of the leading suppliers of water and fluids-management services used in fracking for the oil and gas industry.

The EPA injected tracer chemicals into the fluids that were pumped into the wells at around 10,000 feet below the surface and monitored them at the 5,000-foot level. To the chagrin of the agency and the environmentalists, they found nothing. The regulatory agency ultimately punted on its study, which was originally supposed to be peer-reviewed, turning responsibility for its completion over to state authorities and high-tailing it out of town.

The Energy Department, meanwhile, conducted its own tests and just concluded a landmark study determining that fracking isn't responsible for contaminating groundwater supplies at all. As for the flaming faucets, it was a condition known in the area for years before drilling ever occurred there. Whether fracking causes earthquakes is still a matter of conjecture.

But with two agencies seemingly giving the procedure a green light to continue, the Justice Department is stepping in to investigate supposed anticompetitive practices. Halliburton (NYSE: HAL  ) , the favorite whipping post of environmental activists, is the industry leader, with an estimated 29% share of the pressure pumping market, while Baker Hughes had a 4% share. Schlumberger (NYSE: SLB  ) , which is the second biggest services provider with a 21% share, hasn't said whether it's received any inquiries from the government.

Yet it's a strangely timed investigation, since the onshore pressure pumping market peaked a few years ago, and like the industry they service, the pressure pumpers have seen margins fall as a glut of equipment flooded the market. While there is an offshore market for pressure pumping, it's tiny by comparison, and analysts are left scratching their heads wondering what the Justice Department is actually trying to accomplish, particularly as both Halliburton and Schlumberger develop new technologies that minimize pressure pumping a a whole.

A stalled initiative by activists at the EPA and a clean bill of health by Energy could give some indication of why Justice is now involved, but while investigations don't always lead to charges, this fishing expedition can still serve to make mischief. 

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Read/Post Comments (9) | Recommend This Article (4)

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  • Report this Comment On July 28, 2013, at 3:53 PM, Dadw5boys wrote:

    Well goes down 1000's of feet below the water table and they claim the gas will not seep into the water high above. The rock they are frackin crumbles to release gas and they think it is contained in just their well .

  • Report this Comment On July 28, 2013, at 6:40 PM, mike28584 wrote:

    To me it looks like that if Obama can ton get the EPA to stop hydraulic fracturing he will find another way. All I can say it looks like Obama does not want the United States to ever cut our dependency on middle east oil. and to keep the job/economy down. Stop the pipeline, stop electric companies from burning coal.

  • Report this Comment On July 28, 2013, at 6:58 PM, phillipzx3 wrote:

    Mike,

    Obama isn't the one trying to stop the natural gas companies from having success. And we don't have a "dependency" on middle east oil.

    You have access to the same information the rest of us do. A little research will bring to light only 13% of our oil comes from the middle east. Hardly what one could call a "dependency."

    You want to know who wants NG to fail? The coal companies. Why? It's competition against their product. NG power plants are replacing coal power plants because it's a CHEAPER FUEL!

    Notice how the coal, gas and nuclear power plant companies are complaining about solar, wind and other renewable's? They didn't complain only a few, short, years ago. But they're now seeing their profits being reduced by these technologies they claimed could/would not work. It appears they were wrong.

    We don't need a fossil fuel based electric supply. We maintain status quo because it is the easy way out. Nothing more, nothing less.

  • Report this Comment On July 28, 2013, at 8:25 PM, Rob61a wrote:

    obama says he is creating jobs and yet he is closing coal mines coal fired electric plants and the rest of the crap he is doing.

    This is just yet another way to get more people to depend on the government and this way he can slide us into a socialist country. Hell he is already doing what he wants, laws mean nothing to him.

    The constitution is just s piece of paper to him it means nothing. People better start waking up to stop him or this country is done.

  • Report this Comment On July 28, 2013, at 9:16 PM, Beclear wrote:

    If Haliburton is involved it has to be very bad for the environment and highly profitable......just like they ran the well capping disaster that led to the Gulf Oil Spill

  • Report this Comment On July 29, 2013, at 5:46 AM, flatusm wrote:

    Obama has said he wants energy expensive enough that we use solar and park the family car. Some things, he does work hard to accomplish.

  • Report this Comment On July 29, 2013, at 7:57 AM, fangzamillion wrote:

    There is no limit to what the leftists will do to stop anything which might produce domestic energy. Having abundant, affordable energy sources available - especially that produced within The United States - could interfere with their overall objective: turning the U.S. into another third world country.

    The lamest charge is that of groundwater contamination, which has never been show to occur. There is nothing to indicate it could actually happen. Still, this person 'feels' that it will, and that one 'thinks' it might. If anyone had any KNOWLEDGE, I would listen. What someone with their own agenda says they 'feel' doesn't carry much weight with rational folks.

  • Report this Comment On July 30, 2013, at 12:56 PM, smacunalum wrote:

    Phillip,

    I think you're a little farther down the road than we actually are.

  • Report this Comment On August 11, 2013, at 11:47 AM, rainmanUT wrote:

    Fangzamillion. Did you do any research into fracking ground water contamination?https://www.youtube.com/watch?v=4LBjSXWQRV8&feature=yout...

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