Ken Silverstein | Dec 21, 2010

New York's governor has signed an executive order stopping the process by which natural gas developers drill for shale until the state completes a study. What then does that portend for "hydraulic fracturing" and the shale gas industry?

Fracking - as it is called - is now controversial because of its alleged effects on drinking water supplies. Industry says that the process is safe, although both national and state regulators want to take a closer look. While New York has taken the most pronounced step, the U.S. Environmental Protection Agency has also begun an intensive investigation into the matter.

"Thanks to the well-stimulation process, natural gas that would otherwise be too deep and too difficult to access suddenly isn't - which means more energy, more jobs, and more revenue for state and local governments," Kathryn Klaber, president and executive director of the Marcellus Shale Coalition. "But we know the process has to remain safe to remain effective. And so that's why we continue to work with state regulators to ensure that our environment and groundwater are protected."

Natural gas explorers must pump water, sand and a concoction of chemicals deep underground to split the gas from the rocks where they are embedded. Critics maintain that in cases where those gas deposits are located near aquifers, it could taint drinking water supplies. They are therefore pushing for legislation to force industry to publicly reveal what chemicals are used in the fracking process. EPA, by comparison, is asking for companies to voluntarily disclose this information.

The ultimate oversight of the fracking practice will have huge implications not just for the industry but for consumers as well. The U.S. Department of Energy is predicting that shale gas will supply 20 percent of all fuel supplies by 2020. Nowhere is that process more contentious than in the Marcellus Shale. As much as 500 trillion cubic feet of natural gas is estimated in the area, which stretches from New York and Pennsylvania and into Maryland, Virginia, West Virginia and Ohio.

In a highly publicized case, Pennsylvania residents have filed suit against Cabot Oil & Gas. They are saying that the company polluted their drinking water - a position rebuffed by Cabot, which sites a 2004 EPA study that says fracking poses a "minimal" threat. While the suit remains in effect, EPA has since said that is doing a new study as the previous one is alleged to be riddled with conflicts. That one will complete in 2012.

Industry, furthermore, counters that not only are the amount of chemicals it uses small but also that the shale is too far underground. That is, those deposits are typically a mile or deeper below the surface, making it improbable that any toxins would resurface. At the same time, they say that they spend considerable resources to mitigate any damages.

Voluntary Disclosures

The Obama administration would like to see natural gas make headway in electricity markets. That's because it releases half the carbon as coal. At the same time, the White House agrees with Congress that the drilling process could derail the whole shale industry. That's why the administration endorses a voluntary approach to disclosing what fluids are used while fracking.

Producers oppose such revelations, saying that information is secret. They say that the better approach is to use best management practices. That takes into account such things as monitoring and testing protocols as well as the re-use or recycling of wastewater.

As part of a $32 billion measure to fund parts of the EPA, Congress said that the EPA must use an open and "credible approach" by which to analyze the effects of fracking on drinking water. To that end, EPA favors an approach that encompasses more factors than the one it did in 2004. That is, it would look beyond the impact that fracking has on drinking water and into such things as land use and local air quality.

"Given the agency's increased focus in this area and the likelihood that fracking will impact thousands of largely rural, poor communities throughout the country, EPA's report will likely accommodate environmental justice considerations," says a report by the Kelley Drye consultancy. "While too early to tell, the eventual study most likely will strike a compromise between a comprehensive life-cycle assessment and a study confined simply to potential direct drinking water impacts."

Industry says that it will work with the EPA to provide the necessary data it needs to reach a conclusion. Developers, though, are pointing to a recent study done by the Pennsylvania Department of Environmental Protection that shows no documented reports of groundwater contamination as a result of hydraulic fracturing.

The industry is also emphasizing its safety record, noting that 100,000 wells are drilled each year using hydraulic fracturing. It also says that shale gas will play an important role in the generation of electricity, maintaining that it is not just a viable alternative to coal but also a fuel that will provide much needed flexibility. 

"Hydraulic fracturing is an absolutely necessary process for removing natural gas from the ground and cultivating this very attractive and environmentally friendly form of energy," says Michael Economides, an engineering professor at the University of Houston. "Natural gas exploration must be guided by best practices set forth by engineers, not a one-size-fits-all approach to regulation."

The pressure is on the shale gas industry. While the states are reacting differently to the fracking process, the ultimate arbiter is likely to be the EPA. If the sector is to reach its potential, it must work with the communities where it operates and make voluntary disclosures of non-proprietary information.

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