Sustainable Fracking? For Real?

Hydraulic fracturing, or fracking, has hardly been the darling of the environmental movement. Plagued with such ominous-sounding concerns as fugitive emissions, induced seismicity, and groundwater contamination, fracking has emerged as something of a dirty word in many quarters. Yesterday, a new coalition of environmental groups and fracking companies opened for business, and it may be about to change things.

A kinder, gentler drilling
The Center for Sustainable Shale Development, or CSSD, aims to foster continuous improvement and innovative practices in fracking operations by way of voluntary performance standards and third-party certification. The CSSD's first corporate partners are Chevron (NYSE: CVX  ) , Royal Dutch Shell (NYSE: RDS-A  ) , Consol Energy (NYSE: CNX  ) , and EQT (NYSE: EQT  ) .

These companies have agreed to a set of 15 voluntary standards in their fracking operations in the Marcellus Shale. While Marcellus is the nation's largest shale play, located in the Appalachian Basin, it's still just one among many. Nevertheless, if this is the beginning of a movement, it has to start somewhere.

The 15 standards are highly detailed and take into account such factors as topography, geology, varying technologies, and more. If you want to get into the nitty-gritty, check out the full document. If we sum up the main points, the standards initially address two broad categories. To protect the air and climate, companies agree to:

  • Limitations on flaring, the practice of burning off excess gas during oil extraction, which releases methane -- a potent greenhouse gas -- into the atmosphere.
  • Use of "green completions," which allow the capture of natural gas at the wellhead as an alternative to flaring.
  • Reduced engine emissions.
  • Emissions controls on storage tanks.

To protect the surface and ground water, companies agree to:

  • Maximized water recycling.
  • Development of groundwater protection plans.
  • Closed-loop drilling, which eliminates the common practice of storing waste fluids in open pits, thus greatly reducing the risk of toxic leaks and emissions.
  • Well-casing design, also aimed at preventing leaks.
  • Groundwater monitoring.
  • Wastewater disposal.
  • Reduced-toxicity fracturing fluid -- in addition to water, various chemicals are used in the fracking process.

What's in it for the companies?
Why would a for-profit company sign on to something like this, which surely must carry additional cost? Well, some think they shouldn't. Chesapeake Energy (NYSE: CHK  ) has suggested there's no reason to go beyond existing regulatory requirements. Chesapeake has publicly stated it won't join or support the CSSD. Given Chesapeake's status as the largest leaseholder in the Marcellus, that's a big chunk of the region that won't be on board with this initiative.

Chesapeake is being shortsighted. Consider the statements from some of the pioneering companies. Nicholas J. DeIuliis, president of Consol Energy, said, "[T]he aim is for these standards to represent excellence in performance." Bruce Niemeyer, president of Chevron Appalachia, said, "Raising the bar on performance and committing to public, rigorous, and verifiable standards demonstrates our companies' determination to develop this resource safely and responsibly."

Behind those polished statements is a legitimate fear on the part of industry majors that fracking has become something of a free-for-all. They see smaller, less accountable operators engaging in questionable practices that could lead to the kind of catastrophic event that would condemn fracking in the court of public opinion forever. Given this, companies can create a competitive advantage in environmental protection, which would only be strengthened in the likely event of increased regulation.

Paradigm shift or greenwash?
The environmental community has had a mixed reaction to the CSSD. Richard Liroff, executive director of the Investor Environmental Health Network, or IEHN, told me that the standards align closely with the best practices for which his group advocates. Liroff also observes that IEHN found very little industry disclosure on these practices in a recent analysis. While he points out some weak spots -- for instance, the standard on less toxic fracking fluids has no provision for reporting progress -- he doesn't see this as a deal-breaker.

It's not difficult to imagine more robust standards potentially covering issues of community concern such as traffic management practices, but we shouldn't let the perfect be the enemy of the good, even though for understandable reasons, environmental and community health activists would like to see enhanced stringency and greater scope.

The Sierra Club dismisses the initiative, saying that voluntary standards are no substitute for tough regulation.

By contrast, the Environmental Defense Fund -- one of the CSSD partner organizations -- acknowledges this concern, but still sees the CSSD as a crucial step forward. "CSSD isn't a substitute for effective regulation. Strong rules and robust oversight is a nonnegotiable bottom line," said EDF's Matt Watson in a press release. That said, Watson sees the potential for the CSSD to do for the natural gas industry what U.S. Green Building Council's LEED program did for the building industry. LEED's building-certification system continues to drive a transformation in the efficiency and sustainability of buildings in the U.S. and beyond.

Let's hope Watson's optimism is well placed. Natural gas is already helping to improve the United States' energy independence, and it could play a role in constraining climate change, but only if it proves safe. Companies like Chevron, Shell, EQT, and Consol Energy are demonstrating important leadership in securing natural gas' future, which will benefit them in the long run. Chesapeake may just get left behind.

More to the natural gas story
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Read/Post Comments (6) | Recommend This Article (10)

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 January 24, 2014, at 12:18 PM, Whumpsnatz wrote:

    No matter what changes are made, fracking is not and never will be substainable. Or is someone now growing more gas underground? Fracking is an extractive industry, just like oil drilling and coal mining. Once the gas is gone, that's it.

    "Substainable fracking" is a nonsense phrase.

  • Report this Comment On January 24, 2014, at 2:13 PM, CMO32 wrote:


  • Report this Comment On January 24, 2014, at 2:18 PM, CMO32 wrote:

    Hmm. Let's have companies with a ve$ted interest set the standards for how the process should work. Wrong - these committees should be made up of scientists with an unbiased opinion and not receiving a check from the companies or within the arm of the company, the citizens who's livelihoods are affected by this, and a small representation of company officials.

    I also agree with Whumpsnatz comment above

  • Report this Comment On January 25, 2014, at 4:41 PM, gkirkmf wrote:

    Given the rapid depletion experienced in fracked wells, companies can't afford to spend another dime on the niceties on your list. This is the real problem with this entire industry.

  • Report this Comment On January 26, 2014, at 2:39 AM, nolasue wrote:

    The Big Oil/Gas companies want to sell and export OUR gas, yes the gas that WAS supposed to last us 100 years. So we can only be energy independent for a shorter time than was originally touted. If I recollect, the oil industry was regulating itself into the Macondo well disaster, so much for honesty. If the Gas Companies really want to do all these environmentally correct things they SAY they will, then they should Not have any problem being totally transparent with their methods and results of fracking and to be in agreement with the REAL Scientists and Environmental groups that are NOT PAID by these Gas producers or have any monetary stake in the gas industry. Can you say that INVESTOR environmental health group has no link monetarily to the fracking/gas industry? it's very name implies it has a big interest,to do what the OIL/GAS industries want which would be a big smokescreen for real reform without the REAL Environmental groups on board.

  • Report this Comment On January 27, 2014, at 10:15 AM, sevenheart wrote:

    Contrary to the comments above, the industry is regulated on many levels, government and industry. This coalition is not really advancing anything that isn't already being done due to economic incentives. Water recycling has grown, closed loop systems are the standard in most states, there are even companies using natural gas to frac (no k in fracture). Innovation is way ahead of the environmental movement not just because those of us in the industry actually breathe air, drink water and live in the areas where fracing is used, but because it makes economic sense. Chesapeake doesn't need to fall lock step into a PR campaign to avoid the lawsuit lottery, they are drilling and completing wells in an environmentally sound manner already. In fact they started automatically testing water wells for methane content and water quality prior to all drilling activity showing people they may have had methane in their water before any drilling was contemplated. Curses, no lawsuit against big oil here, now I have to rely on Powerball to get rich!

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Sara Murphy

Sara has been writing about and analyzing companies from a sustainable investment perspective for the last 15 years. An ardent optimist, she believes that it is entirely possible for all stakeholders to benefit and profit from companies' ingenuity and innovation.

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