Hydraulic fracturing -- or "fracking" -- has become a major advantage in prying oil and natural gas from subterranean deposits. Unfortunately, for all its importance in meeting our expanding energy needs, the process has also attracted considerable concern.
In fracking, a combination of water, sand, and chemicals blasts shale formations, shattering the rock to release the hydrocarbons within. Thus far, the primary manufacturers of fracking fluids, including Halliburton (NYSE: HAL), Baker Hughes (NYSE: BHI), and the smaller Flotek (NYSE: FTK), have been reluctant to disclose their precise chemical compositions, for competitive reasons. However, the technique's escalating criticism results from fears that the chemicals used could contaminate water tables.
As a native Texan, I'm therefore pleased to note that there may be a solution at hand in my state. The Texas legislature is considering a bill that would require companies to disclose the specific chemicals used in their fracking fluids. The bill has garnered bipartisan legislative support, plus the backing of energy producers and environmental groups alike.
Passage of the bill, which would take effect on Sept. 1, would be important for Texas, the home of three major shale plays: the Barnett, the Eagle Ford, and the western portion of the Haynesvile. But it could also serve as a model for states like New York and Pennsylvania -- home of the Marcellus and Utica shales -- where criticism of fracturing has been especially virulent. Indeed, even Tennessee, which boasts the southern extremity of the Utica Shale and the lesser-known Chattanooga Shale, has seen its natives grow restless over the potential fallout from fracking fluids.
Should the Texas bill pass, and become a precursor for other states, beneficiaries (beyond the general citizenry) would include the companies now operating in the various shale formations. That clearly would include Chesapeake Energy (NYSE: CHK), a shale pacesetter, as well as ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX), the two biggest U.S.-based energy producers.
Beyond the legislative approach, manufacturers are working to produce fluids formulated from more benign ingredients. Halliburton and Baker Hughes are developing chemicals that they're calling CleanSim and BJ SmartCare, respectively. Both are being formulated from processed food ingredients. And perhaps Flotek's 30% share price gain on Thursday owed at least in part to anticipation of its citrus-based fracturing chemicals.
So, while the Texas drilling bill is still wending its way through the state's legislature, and CleanSim et al haven't yet achieved full-scale use, hydraulic fracturing may soon demonstrate to its critics that it is, in fact, all it's cracked up to be.
