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General Electric's Billion-Dollar Fracking Bet

Source: U.S. Geological Survey; Marcellus Shale fracking operation. 

General Electric Company (NYSE: GE  ) announced $10 billion of clean energy investments, and fracking is front and center. With natural gas fracking at the forefront of energy and environmental debates, here's how General Electric Company expects to win big. 

Fracking for the future
General Electric Company plans to pour $10 billion into clean energy research by 2020, paving the way for the next generation of "Ecomagination" initiatives. This cross-company business initiative has already generated a whopping $160 billion in sales since its 2005 launch, and General Electric Company expects natural gas hydraulic fracturing, or fracking, to continue to play a pivotal role. 

"Ecomagination is one of our most successful cross-company business initiatives," said General Electric Company Chairman and CEO Jeff Immelt in a statement. "Bold investments in Ecomagination research and development have resulted in strong returns for shareholders and improved cost and emissions savings for our customers." 

General Electric hasn't said how much of the $10 billion is headed toward fracking research specifically, but its goals are lofty. The company is partnering with Norwegian oil and gas company Statoil ASA (NYSE: STO  ) to potentially revamp water use in the fracking process.

Traditionally, hydraulic fracturing requires immense amounts of water to extract natural gas. Since 2011, nearly 40,000 oil and gas wells have guzzled 97 billion gallons of water, according to a report by the Ceres Investor Network. At current consumption rates, that means fracking sucks down as much water as around 60 cities with 50,000 residents each. 

Nearly half of all wells are in regions with high or extremely high water stress, and over a third of all wells are in areas suffering from groundwater depletion. 

Statoil ASA and General Electric are sick of being thirsty, and they're looking for a way to economically use CO2 as a replacement for H2O. The practice exists today, but Statoil ASA and GE want to create an innovative capture-use-recapture system that would cut emissions and reduce costs. 

By using gas that would otherwise be flared off, the two companies hope to change the game for fracking water use. According to GE Global Research engineer Mike Bowman, CO2 may even be a better extraction tool than our current watery ways: "The efficiency of the actual fracturing process should be the same as or close to the water process," Bowman said. "An efficiency benefit will come when the well starts producing since the CO2 that is left behind will improve the yield of hydrocarbons out of the well more than using water." 

Source: Wikimedia Commons, Battenbrook. 

It's a win-win
General Electric is smart enough not to play politics, and this latest move puts it on the side of fracking opponents and proponents alike. While environmental groups will give the thumbs-up to less water use, natural gas companies like Statoil ASA will love the opportunity to cut costs.

General Electric's Ecomagination initiative thrives on creating opportunities to reduce both expenses and environmental impact. With this latest round of R&D, General Electric Company will continue to be a corporation others can turn to for innovative initiatives.

Three stocks for the natural gas boom
Record natural gas production is revolutionizing the United States' energy position -- and General Electric isn't the only company that knows it. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg.

For this reason, The Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. 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 (2) | Recommend This Article (4)

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 March 03, 2014, at 4:44 PM, SalEsman wrote:

    It's nice to remember that New York city uses a billion gallons of water everyday.

  • Report this Comment On March 04, 2014, at 4:11 AM, Odaat wrote:

    A company already benefiting, and part of the solution to use ditch gas / well-head gas on site instead of flareoff, is American Power Group, Inc. (APGI) and their conversion kits that allow the diesel engines powering these fracking operations to run on a mix of diesel and natural gas, including, as mentioned, wellhead / "ditch" gas right at the site. It's free fuel to the operator, and much better for the environment.

    Investors...I outline this in an Editor's Pick article at Seeking Alpha, and in its associated (and very detailed) Instablog. Just enter ticker APGI or author Odaat.



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