Fracking in America

The boom in U.S. oil and gas production is unprecedented in modern America. As recently as October 2005, we were importing 4.56 million barrels of petroleum-based products per day, while exporting just 871 thousand barrels of product.

Miraculously, just six years later, we pulled even. As of last month, we exported 1.1 million more barrels of petroleum-based products per day than we import.

Source: U.S. Energy Information Administration; idea originally appeared in article by the Fool's Morgan Housel in January 2012. Does not include crude oil imports or exports.

As the graph shows, things started to change dramatically around 2006. That coincides with the onset of new, more effective fracking techniques that helped to unlock previously inextractable deposits of both oil and natural gas.

Environmental concerns
This energy boom has been a major economic force for the country, but not everyone is so sure that lower unemployment is a fair long-term price to pay for possible environmental degradation.

Several groups have raised concerns. First, there is the possibility that carcinogenic chemicals are leaking into the water supply. Along the same lines, others are concerned about the total volume of water needed to frack. And residents in Ohio even think that the disposal of fracked water could be leading to an increase in earthquakes in the region.

Legal requirements for fracking
With so many worried about the potential for harmful side effects, the federal government looks poised to enact standards early next year. The standards will probably cover the disclosure of chemicals used in fracking, the safe construction of wells, and the specifics of wastewater management.

Depending on where they operate, these regulations could have noticeable consequences for the nation's top energy companies:

Top natural gas producers

Company

Million Cubic Feet/Day 

ExxonMobil

40.0

Chesapeake Energy (NYSE: CHK  )

33.7

Anadarko

29.9

Devon Energy (NYSE: DVN  )

22.5

Southwestern Energy (NYSE: SWN  )

18.2

Source: Natural Gas Supply Association; numbers for first quarter of 2013.

Finding statistics for oil output in the United States by company is a little more difficult, but in Texas, which produces twice as much oil as the next closest state, the top producers are easy to find: Occidental (NYSE: OXY  ) and EOG Resources (NYSE: EOG  ) , which offered up 117,000 and 110,000 barrels of oil per day in 2012, respectively.

What could these standards mean?
It would be easy to simply conclude that these seven companies would be the most affected by changes in fracking regulations. But it's not that simple.

In an effort to help you better understand how federal, state, and local rules could affect your energy investments, I've broken down seven of the country's top energy producing states. By clicking on any one of the black states, you'll be taken to an article outlining how fracking regulation is playing out there, who the major energy companies are, and how they might be affected by changes in fracking rules.

Source: Createaclickablemap.com

The differences from state to state and community to community can be drastic. For instance, North Dakota, Texas, and West Virginia are certain that their fracking safety standards are so good, the federal government need not concern itself with regulations. A tiny county in New Mexico, on the other hand, has followed the lead of New York state in putting a stop to any and all forms of fracking. And studies coming out of Pennsylvania questions whether it's fracking or just compression stations that are damaging the environment.

Making sense of this all can be difficult. For that reason, The Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. Only one of the three stocks is mentioned in this article. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


Read/Post Comments (11) | Recommend This Article (28)

Comments from our Foolish Readers

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 September 12, 2013, at 6:02 PM, live2ride wrote:

    I think perhaps you missed the word "millions" in your barrel per day stats.

  • Report this Comment On September 12, 2013, at 6:04 PM, live2ride wrote:

    Or maybe thousands, but hard to believe only 4560 barrels of oil per day.

  • Report this Comment On September 12, 2013, at 7:05 PM, TMFCheesehead wrote:

    Good catch. It was in thousands of barrels, so it would be 4.56 million barrels per day

    Brian Stoffel

  • Report this Comment On September 13, 2013, at 10:54 AM, sevenheart wrote:

    On balance a good series of articles (following links on state map). As briefly as I can, I have over 30 yrs oilfield experience. In that time I have witnessed the astonishing pace of innovation in the industry, from improved efficiency in refining processes when it appeared no more efficiency could be gained to the rapid drilling technology that has come with extended reach horizontal drilling. In the case of fracing (esoteric term for fracturing) the industry suffered from a public lack of interest in oilfield processes to a vast attack of propaganda creating a crisis where none existed, Gasland being the most influential distribution of anti-oil lies. Perhaps a little late, the industry has responded with public service advertising which is honest but may appear to some to be covering something up. The geology involved is too complex for this forum, but there are two distinctly different types of methane, one that occurs due to pressure and temperature obtained at depth, the other from the decomposition of organic material in depths commonly utilized for fresh water wells (coal, peat, etc). Chesapeake started a program of testing water wells for the presence of methane and water quality within a mile radius of proposed wells prior to all activity and stunned many to find their old water wells already produced methane (and CO2 and other entrained gases). They test during and after drilling and completion activity and there is not one incident of water well contamination. When drilling through fresh water formations water well drilling methods are used.

    Back to my initial point on innovation, the oil industry is so far ahead of the regulation on fracing that it is almost unnecessary. Driven by economics, water recycling is almost SOP, companies are purchasing processed effluent from municipalities for some frac water, well bore construction has been improved because issues that could cause water table damage are also detrimental to the production of the well, the chemicals used have always been available by digging through MSDS sheets, and have consisted of very benign polymers that break down in air and with household bleach and guar gum which is used in ice cream and other foods among other things to keep sand suspended and placed within the momentarily expanded fractures in the rock to increase production.

    The industry has faced environmental issues head on for decades, hiring environmental studies grads and self regulating which has actually driven costs down and green drilling can be more cost effective.

    Some sources for good industry info are rigzone.com and worldoil.com. I've made some great investments on info found there. Also, could I recommend watching one company that made the Marcellus and subsequent Utica plays successful? Range Resources drills in the Marcellus at 1/4 the cost of Chevron and at least half the cost of everyone else in the play. They have comparable success in oil plays compared to Apache and others that are viewed favorably on the Fool. These are brilliant guys leading the way to the future and worthy of watching.

    New York state is missing out on a great opportunity now, but oil companies, as in the past will just sigh and wait for a more favorable regulatory climate to eventually pursue those resources, same in Mora County, NM.

    I only own oil stock in Conoco Phillips and Phillips.

  • Report this Comment On September 13, 2013, at 11:53 AM, TMFCheesehead wrote:

    @sevenheart-

    Many thanks for the detailed, from-the-inside perspective.

    Brian Stoffel

  • Report this Comment On September 15, 2013, at 2:07 AM, BillFromNY wrote:

    Very good post. Deserves a wider readership.

  • Report this Comment On September 15, 2013, at 7:18 AM, gkirkmf wrote:

    Sevenheart neglects the worst of the drilling problems which is bad cement jobs when finishing the wells. I have read several articles by petro engineers which discuss this. The main side effect of this is that the wells leak methane into the air. Molecule for molecule methane is 185 times as bad as CO2 for hanging around in the atmosphere and contributing to higher sunlight absorption. What the worst that can happen if we are more careful about drilling? Petro products will cost more... Whats the worst that can happen if we push the climate over an edge... 100,000 years of hot earth.... A little insurance against that is not a foolish thing in my book.

  • Report this Comment On September 17, 2013, at 2:04 PM, Schneidku40 wrote:

    gkirkmf, the good thing about bad cement jobs is the problem can be fixed with better quality control. It's not a problem with the process (fracing or drilling in general) itself. With increased awareness of the problem, it will get better. Production companies won't hire cementing subcontractors with a bad reputation, they don't want that potential liability.

    NIce post sevenheart.

  • Report this Comment On September 17, 2013, at 2:38 PM, jjlnko wrote:

    Sorry, but fracking is a bad idea and I will not invest in a company that enages in fracking. If we burn all available oil on earth, global warming will spin out of control and the planet will become inhabitable (at least for humans). The focus has to be on alternative energy. No, I'm not a hippie, but a professional with a portfolio of more than 2 million dollars and my partner is a climate research scientist. Non-scientists can deny human-caused climate change as much as they want, but is happening and won't go away by itself. I will not support the fracking industry.

  • Report this Comment On September 17, 2013, at 8:30 PM, BillFromNY wrote:

    Sorry, jjlnko, but human-caused climate change hype has already peaked and is on a fast downhill slide. The population after about ten years has not seen any effects on them of this supposed catastrophe. They are not impressed by footage of an arctic glacier supposedly breaking off too early in the spring.

    By the time the lethal consequences of global warming are supposed to show themselves, we'll all have been dead for many years. We all have enough problems now when we are alive to worry about some predicted disasters after we are dead.

    From Toffler's Population Bomb, that never went off, to the cold fusion fraud, scientists have sought attention. And I wonder who is paying the salary of your "climate research" scientist. No one who would cause your partner to be biased, I'm sure.

  • Report this Comment On September 18, 2013, at 10:49 AM, Schneidku40 wrote:

    Global warming and cooling is absolutely nothing new for the earth. 40 million years ago there was no ice on earth. There is evidence that the earth has been actually been ice-free more than it has had ice.

    Various sedimentary rocks (including coal), vegetation, soil, and even the ocean water are carbon sinks. Before all this coal oil, limestone, etc. were formed, where do you think that carbon was? Hint- not in coal, oil, or limestone.

    I'm not saying we should go out and burn it all up willy-nilly. I am a conservationist. But I'm not a radical. I certainly wouldn't tell you where to invest, jjlnko, or have any objections to you not investing in any fracing companies.

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