Despite the hysteria fomented by propaganda films like Gasland and Gasland II that oil and natural gas hydraulic fracturing is responsible for everything from flaming faucets and polluted groundwater to earthquakes and back acne, the government is now in full retreat on at least two of those claims. (OK, three. I made up the nexus between fracking and back acne.)
Not only has the Environmental Protection Agency punted its studies on the fracking process as a causation of groundwater pollution, but the Energy Dept. also just released a landmark study saying the process isn't responsible for contaminating groundwater supplies.
In fracking, which has actually been used by the industry since 1947, drillers pump large amounts of water, fluids, and chemicals into the ground under high pressure some 10,000 feet below the surface, which causes the rock formations to crack, or fracture (hence the name). The fluids contain proppants -- typically sand like that provided by U.S. Silica (NYSE:SLCA) or ceramic beads such as those made by CARBO Ceramics (NYSE:CRR) -- that prop open the fissures, allowing the gas and oil to flow more freely.
Environmentalists have charged the industry is culpable for the damage done. In one notable example of regulatory overreach, the EPA accused Range Resources (NYSE:RRC) of polluting groundwater in Texas to such an extent that kitchen faucets could ignite from gases they were contaminated with. After it imposed a special "endangerment order" on the driller, saying its actions were responsible for at least two houses being "ready to explode," the EPA quickly backtracked and dropped all the charges against Range without explanation (for a government bureaucracy, it's cool to describe 15 months as "quick").
Turns out, Range wasn't responsible at all. Residents had been reporting methane in the water for years before any kind of oil or gas drilling was being done in the area. It was a naturally occurring phenomena but one that had environmental activists even ginning up evidence. In one particular circumstance, which was prominently featured in Gasland II, a court found activists, who were working with the EPA, had hooked up a garden hose to a gas vent and not a water line and lit it on fire in an effort to give the agency a reason to act. The movie's director was apparently snookered (or willfully duped) by a hoax.
Yet oil and gas industry services specialist Nuverra Environmental Solutions (OTC:NESC) has been telling anyone who will listen that fracking doesn't cause groundwater pollution. The company, which was previously known as Heckmann and is the leading supplier of water to the oil and gas industry, says fracking occurs 10,000 feet below the surface -- and water seeps down, not up, so the probability that it is responsible for the polluted water supplies is negligible.
The DOE study, which injected tracer chemicals into the fracking fluids so they could follow them, confirmed that. It injected the fluids some 8,000 feet below the surface and then monitored for them at 5,000 feet. None were ever detected, meaning that groundwater -- which is typically situated around 500 feet below the surface -- was about a mile away from any potential contamination.
No doubt those conclusions are behind the EPA's decision to drop its study of groundwater contamination in Wyoming, instead allowing the state to complete it. Originally, the study was slated to be peer reviewed, but after questions about its methodology arose, it decided to abandon it altogether.
Primarily as a result of hydraulic fracturing, the U.S. is awash in natural gas, so much so that it's about to become a major exporter, with Cheniere Energy (NYSEMKT:LNG) building the first export facility in Louisiana. Japan will be the key market, too, as it currently pays around $16 per mmBtu for liquefied natural gas and Cheniere says it can deliver it to Asia for around $9.50 per mmBTU. Europe, which currently pays about $12 per mmBtu, will be able to get it for under $8 per mmBtu from Cheniere.
Indeed, it will be natural gas, if anything, that leads to an economic recovery here at home. Because we have so much, its price has remained remarkably low, challenging even the low cost of our other abundant resource, coal.
And in the wake of these studies showing that we can still frack safely, expect other fears, such as that it's responsible for earthquakes, to fall by the wayside as well.