Fracking essential to oil and gas production, but risks remain

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One of the most important advancements for the modern oil and gas sector has become a household curse word.

Hydraulic fracturing, or fracking, is crucial to producing petroleum and natural gas and transformed the U.S. industry in the last decade. Fracking is responsible for the industry’s success. But drilling companies must be upfront with the public about environmental risks, or face backlash, said Andrew Logan, Ceres oil and gas program director.

The process is controversial because residents in several states claim chemicals from drilling and fracking have contaminated groundwater. New York and Maryland banned fracking and municipalities in 16 states have moratoria or other restrictions.

Logan’s nonprofit group represents institutional investors working to make markets more sustainable. Part of the contention that surrounds fracking is that environmentalists and industry workers have been talking past each other, he said. Those in the petroleum sector have a narrow, technical fracking definition.

Fracking is the process in which millions of gallons of water, tens of thousands of gallons of chemicals, and millions of pounds of sand are mixed together and then the slurry is pumped at high pressure into the wellbore, forcing cracks into rock layers and releasing oil and gas locked inside. Fracking typically happens in the horizontal portion of a well, after the hole is drilled. Those techniques were applied to dense shale rock layers and produced extraordinarily productive natural gas wells.

Environmentalists often use fracking as shorthand for the entire process that includes finding reservoirs, drilling wells, fracking wellbores, picking up petroleum in trucks and disposing of wastewater as well as the well’s long-term lifespan.

“That’s really about shale development broadly and less about fracking that individual well,” Logan said.

Richard Spears is an engineer and consultant for the oil-field service industry. He fracked wells in central Oklahoma for Halliburton in the 1970s and ‘80s. Drillers were targeting the same rock layers then as they are now. The difference is the wellbores were drilled vertically then and frack jobs used much less sand and water. Now it’s common to use five times as much sand in a single frack job than was used in the ‘80s.

“We always fracked them, we just didn’t think to turn it sideways,” Spears said. “That’s made the U.S. become a net exporter of oil.”

Logan said what’s new about fracking is the scale and intensity. Wells are now drilled and fracked in people’s literal backyards, in front of churches and between runways at the Dallas-Fort Worth airport.

“The degree to which it has gotten close to urban populations and to people’s lives is different,” Logan said.

The shale boom pushed drilling into Arkansas, North Dakota, Ohio, and Pennsylvania, places where people don’t have a century of experience with the oil and gas industry. New York’s fracking ban is a cautionary tale, Logan said, regardless of whether industry critics fully understand the effects of drilling.

Though Colorado does have decades of experience with oil and gas, regulators there created tighter restrictions on leaking natural gas from oil and gas wells, pipelines and storage tanks.

Despite restrictions in some states, the volatile commodity market had a significant effect on fracking swings. Drilling activity and oil-field services contract prices drive fracking demand, Spears said. Companies spent $44 billion on frack jobs worldwide in 2014, the industry peak. The industry spent $29 billion in the U.S. alone. West Texas Intermediate prices reached a high of $107.26 per barrel that year.

Demand bottomed out two years later as commodity prices plummeted. Companies spent $14 billion worldwide in 2016, with only $9 billion spent in the U.S. Crude oil fell to 13-year-lows, reaching $29.42 per barrel.

As oil prices rise, demand has doubled. WTI hovered around $50 per barrel in the first half of 2017, and $19 billion has been spent on fracking so far this year, Spears said.

Prices for services are expected to be up by 50 percent by October compared to the same month in 2016.

Johnson Bridgwater said the industry faces risks from class-action lawsuits, and executives aren’t calculating what they have to lose. The Sierra Club Oklahoma chapter director said there’s liability from other drillers who say their vertical wells were damaged by horizontally fracked wells. Drillers might also have to pay out large settlements from lawsuits alleging wastewater disposal wells triggered damaging earthquakes in Oklahoma, he said.

Those damage and contamination issues aren’t isolated to Oklahoma. Arkansas and Ohio have also experienced earthquakes linked to wastewater disposal wells and residents in Pennsylvania and Wyoming allege water wells were polluted.

“Everywhere horizontal fracking has been happening, there have been incidents tied to it,” Bridgwater said. “That should be a wake-up call in the field.”

Logan said there are other, potentially substantial risks threatening the long-term viability of the industry. The hottest oil play in the nation is West Texas’ Permian Basin. The region has desert-like climate. It will take about 20 billion barrels of water to drill and frack all the wells needed to fully produce all the petroleum there, which is about the same amount of oil and gas reserves the play is estimated to have, Logan said.

If the industry doesn’t manage its water resources, that could further degrade the oil and gas sector’s reputation. Even though President Donald Trump’s Cabinet promised to ease regulations on the fossil fuel industry, fewer rules raise more risks for the petroleum sector. Lax laws lead the industry to overuse water, to under-manage natural gas leaks and to ignore things that cause seismic activity.

“Water scarcity, methane leakage, earthquakes, all those things are real,” Logan said. “For the industry to have a long-term future, you need a strong, stable regulatory environment.”

–By Sarah Terry-Cobo

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