Don't let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool's FREE and easy new watchlist service today.
To even the most ardent opponent of the process, it's time to acknowledge that fracking is no longer a fad. The boom in U.S. production has created jobs and spurred economic growth, and the chances it will go away are slim to none. That being said, the process is far from perfect. There are several issues that need to be addressed when it comes to fracking. One of the problems, though, is that there are many stories out there tied to fracking that may or may not necessarily be true, so it's hard to put a finger on what needs to be done to make it safer for everyone. So let's dig into five fracking-related questions to which you can get a "yes" from one side of the argument and a "no" from the other and determine what is right.
1. Companies won't tell us what is in fracking fluid: 0.1% True
When fracking got its start years ago, companies like Halliburton (NYSE: HAL ) were much more tight-lipped about what went into fracking fluids, but recently, these companies have opened up quite a bit about what is in them. One industry-based initiative comes through the group fracfocus.org, which has compiled data on over 68,000 registered well sites in the United States. Based on the well count information from Baker Hughes (NYSE: BHI ) , that is equivalent to every onshore well in the past two years. These data sets show the contents of fracking fluid. Here is an example of one submitted by Halliburton. In it, the company discloses 99.9% of the fluids components.
Companies have resisted turning over the data on the remaining 0.1% of chemicals it doesn't disclose, claiming they are industry secrets. However, studies from the EPA are due out later this year that could result in regulations about full disclosure of chemical use. This is a major step forward for transparency in the industry.
2. It's completely unregulated: False.
Somehow, companies in the oil and gas industry were able to persuade federal regulators to give fracking fluids an exemption from the Clean Water Act. As flabbergasting as this is, it doesn't mean the industry gets exactly what it wants all the time. Most oil and gas operations are just regulated at the state level instead. Each state has varying levels of regulation, which can include things such as sealing wells from groundwater sources to certain depths, as well as pre-drilling water quality testing. The following charts from Bloomberg show the types of regulations in place in the most active drilling states across the country.
As I mentioned before, the EPA will be releasing studies later this year that could potentially change the federal rules related to fracking, one of which could potentially involve compliance with the Clean Water Act.
3. Fracking contaminates groundwater. True, but not in the way you think.
The possibility of groundwater contamination from fracking is very real, but most assumptions of where it comes from is not the case. There is a widespread belief that the fracking process causes methane in the shale formation to permeate up into groundwater sources. However, a study by MIT found that 94% of groundwater contamination came from improper sealing of the well bore or above-ground spills. As bizarre as it may sound, this is a better problem to have. It means it can be corrected with more robust requirements for well bore casings as well as implementing best practices on site to prevent spills.
4. Fracking causes earthquakes. Not directly true, but it certainly isn't helping the situation, either.
There is no elegant way to say this: The state of Oklahoma is shaking. So far this year, there have been 252 seismic events -- earthquakes -- compared with 222 in all of 2013. Geologists studying this phenomenon have found that much of this increased activity is the result of massive amounts of water being injected deep underground by oil and gas companies. These undergound disposal wells cause friction on fault lines and, hence, earthquakes.
It would be naive to say that fracking is not the cause of this, because they do dispose of millions of water with these underground wells, but they aren't the only ones. One way this problem can be addressed, though, is to reuse fracking fluids. Bloomberg estimates that certain oil and gas basins will start to see water reuse become a much more widespread practice, and it could significantly reduce the amount of water disposed of in these wells. It's estimated that within seven years, over 90% of the water that flows back out of a shale well will be recycled. I can't say with any certainty that this will stop earthquakes from happening, but reducing water disposal by that much should have a positive impact.
5. Fracking has a water consumption problem in general. Absolutely true, and there are lots of companies looking to address it.
For the most part, the issues I've mentioned are surmountable problems for the industry. Full disclosure of chemicals isn't hard, and better practices at the drilling site would help cut down on contamination and reduce the need to dispose of water. The biggest challenge facing the industry will be finding adequate sources of facking fuid to continue this process for years to come. By 2035, industry analysts expect hydraulic fractured shale will represent over one-third of oil production and 70% of natural gas production. For this to happen, water demand in the industry will triple.
The crux of this issue is that many of the most prolific shale formations in the U.S. are in regions where freshwater sources are already stressed. So the industry is looking to do as many things as possible to reduce the need for freshwater. Companies like Halliburton are implementing water recycling techniques as well as methods to use non-freshwater sources such as water from saline and brackish aquifers. There are also some companies that are developing alternative fluids for fracking such as natural gas liquids as well as supercooled CO2, but these solutions are years away from being being commercially viable on a large scale.
What a Fool believes
The issues with fracking are problematic, and not just for concerned citizens. Many of the problems facing fracking, such as water use, are some of the most expensive aspects of the shale drilling process. The silver lining about all of these listed issues is that most of them can be alleviated through smarter development, such as water recycling. So far, the development of hydraulic fracturing has gone to show that the industry needs appropriate regulation to prevent some of these issues, but the process can be done effectively.
America's $600 billion energy problem means invest in these three stocks today
A dark spectre is looming that is ready to stop America's Energy boom right in its tracks, and no one is talking about it. This one critical element could cost us over $600 billion, but every day we wait, that number grows and grows. The U.S. government thinks investment in this sector is so important, even the Internal Revenue Service will give you a free pass if you invest in this select group of stocks. Our analysts at The Motley Fool have combed over this special class of stocks and identified three that could make you rich! Find out the names of these IRS-gift-wrapped stocks in our special report "3 Stocks The IRS Is Begging You to Buy." Simply click here and we'll give you free access to this valuable investing resource.