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Can Fracking Benefit Your Community Too?

By Matthew DiLallo - Mar 26, 2013 at 6:00PM

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Hydraulic fracturing for oil and natural gas is unlocking vast amounts of resources that have our nation closer to energy independence than we ever believed possible. Despite the environmental risks, especially on a local level, there are some emerging positive outcomes that potentially outweigh those risks.

The effects of fracking are felt by every single one of us. For most, the impact is felt in our wallets, as it's cost less to stay warm and to keep the lights on. To others, the effects of fracking on a local level are even greater.

Take the story of Bradford County, Pa. After years of decline as its manufacturing base moved away, the economy is now booming. In fact, things are so good that the county has been able to retire $5 million in debt and it lowered real estate taxes by 6%. A Bradford County Commissioner has said that "fracking has been an economic game-changer for the entire area."

This has many of its neighbors to the north in New York quite jealous, including my parents who live just across the border. They've lived in the region nearly a decade, and they've watched as their own property taxes have gone up while economic conditions have declined. New York has put a moratorium on fracking until the state can be sure its safe. Many in the state just aren't sure that the risks of fracking are worth these economic rewards.

Until that can be determined with greater certainty, New York will maintain its moratorium on fracking. In Pennsylvania, however, fracking is showing no signs of slowing down despite the risks. In Bradford County, natural gas exploration and production companies have drilled and fracked nearly 1,200 wells since setting up shop in 2005. While there have been no major issues with fracking in the county, the same can't be said of its neighbor: Susquehanna County.

A few years back a well that was drilled by Cabot Oil and Gas (CTRA 1.11%) got the company into some hot water. That faulty well is believed to be responsible for contaminating the water wells of more than 20 homes in Dimock, Pa. Cabot spent a lot of time and effort to make things right; however, the damage to the company's reputation, and to the perception of the industry, hasn't fully been repaired. While the faulty well has since been plugged and the water has been certified by the EPA as safe to drink, the situation highlights one of the real tangible risks of fracking.

The water issue in general is one that the industry takes very seriously these days. It knows that many are worried about an incident similar to the one in Dimock happening in their backyards. The industry is also well aware of an even greater water concern; that is, the immense amounts of water required throughout the fracking process. As you can see from the chart below, millions of gallons of water are used to frack just one well:

Source: Chesapeake Energy

That's one reason why the nation's No. 2 natural gas producer, Chesapeake Energy (CHKA.Q), has taken a page out of the environmentalist's handbook. Under its Aqua Renew program, the company now reclaims much of the water used in the fracking process and treats and recycles a vast majority of it. While that's great news, there could be more good news on the way.

You see, for coal and natural gas producer CONSOL Energy (CNX 2.92%), water has always been a big environmental issue. Not only does the company use a lot of water in its fracking operations, but as a coal miner it's had to deal with acid mine water. To combat these problems the company has been building up its CNX Water Assets subsidiary. Among its many operations, it treats both acid mine drainage and frack water. However, it's that acid mine water that has a potentially interesting win-win environmental solution.

You see, while fracking water gets a lot of press these days, acid mine water from coal mining operations has always been a problem. It is believed that some 300 million gallons of acidic water flows every day from mines into Pennsylvania waterways. To combat this problem the state is proposing to use acid mine water in fracking operations.

The state sees this as solving two problems at once. First, you prevent acidic water from old mines running off into the waterways and killing both fish and plant life. On top of that, you alleviate much of the need to tap municipal and other freshwater sources for fracking. Finally, after its produced, the water can then be recycled or properly disposed.

While it's impossible to claim that fracking is without its risks, the industry is working hard to mitigate those risks. Further, as Bradford County will attest, the rewards on a local level are clearly evidenced in the its strengthened financial situation. When you add in the potential to solve the acid mine water problem, fracking has the potential to have a much more positive local impact on communities than economics alone.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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