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Risky Hydraulic Fracturing?

The nation is experiencing a natural gas and oil boom due in no small part to hydraulic fracturing. In many states, hydraulic fracturing has been the driver behind economic growth. But the process is among the environmentalist movement’s top targets. However, the scientific research on the water-related concerns associated with fracturing suggests environmentalists’ concerns are overblown: although the risks are real, their occurrences are rare.

Although developed in the 1940s, only recently has hydraulic fracturing become widely used as a result of advances in the process. It is important to note that drilling a hydraulically fractured well is basically identical to drilling a conventional well. The main difference stems from the horizontal drilling component coupled with the fracturing process.

After drilling the vertical well and encasing the pipe in cement, approximately 500 feet above the intended lateral zone, a special drill bit is inserted into the well that drills at a sloping angle eventually leveling out at a depth as much as a mile under the surface to drill horizontally. Cement is pumped between the piping and the shale formation to seal the well.

The targeted lateral zone is prepped for the hydraulic fracturing process using an electrified perforation gun to perforate the pipe, cement casing, and shale formation. Because the perforations are not large enough to allow hydrocarbons to flow, a special fluid made of approximately 99 percent water and 1 percent sand and additives is pumped into the well to widen and hold open the cracks in the shale formation.

The injection part of the hydraulic fracturing process is what has triggered most of the environmental concerns, although some local communities object to the growth itself because it can drive up housing prices, increase traffic, and put pressure on governmental infrastructure such as roads and schools.

Of the environmental concerns, three issues stand out—water use, water contamination, and induced seismic activity. There is little doubt that the risks associated with these concerns are real; however, research shows they are less of a concern than opponents would have the public believe.

Because hydraulic fracturing uses approximately two to five million gallons of water per well, much of which stays far below the earth’s surface, many say the process will deplete water supplies. True, as much as 80 percent of the water pumped into a hydraulic fracturing well is removed from surface or groundwater supplies, but in terms of the hydrological cycle, this ignores the fact that burning methane (CH4) produces carbon dioxide and water. Assume that a hydraulic fracturing well uses five million gallons of water, leaves 80 percent underground, and produces 2 billion cubic feet of gas over its 10 year life span. Burning the gas will replace the four million gallons left underground in 6 months and produce 11 million gallons over 10 years. Of course, the “new” water in the hydrological cycle is in a different place and form, e.g. in the atmosphere, but in total, hydraulic fracturing adds water to the hydrological cycle.

Nonetheless, five million gallons of water per well is a lot, especially if it is in locations where fresh water is in short supply. Indeed, 47 percent of the water used for hydraulic fracturing occurs in areas deemed “high or extremely high water stress” zones. However, let’s put the water use in perspective. New York City consumes five million gallons of water in just over six minutes; a single 1,000 megawatt coal-fired power plant uses five million gallons of water in just under 11 hours; and an irrigated golf course uses five million gallons of water in 23 days. Five million gallons of water are needed to produce 64 tons of steel, and 40 American households use five million gallons for annual indoor uses alone. The Susquehanna River Basin Commission concluded that water use in the Marcellus Shale in total “represents a little more than half of the amount currently used consumptively by the recreation sector (golf courses, water parks, ski resorts, etc.).”

Of course, in the arid western states experiencing pressure on the demand for residential, commercial, and agricultural water, adding hydraulic fracturing demands is non-trivial. Balancing these demands, however, need not require banning hydraulic fracturing. The solution is to develop well-functioning water markets to ensure water rights are fully defined and transferable; price signals would lead to efficient water use.

In addition to water scarcity, there are claims that the hydraulic fracturing process will contaminate groundwater. One alleged source of contamination is the fracturing fluids, but there is little evidence to support this allegation. Indeed, studies from Duke University, University of Texas at Austin, Massachusetts Institute of Technology (MIT), and even the U.S. Environmental Protection Agency find no evidence of fracturing fluid contamination in water sources.

The other potential source of groundwater contamination is methane leakage, and there is some evidence of methane in water supplies nearby hydraulic fracturing sites. Although the Duke University study found methane levels about 17 times greater than expected, the University of Texas at Austin report suggests that the higher methane levels may not be due to hydraulic fracturing, but are naturally occurring in the water sources. The MIT report concludes that even if methane contamination from hydraulic fracturing is occurring, it is because of poor well design and preparation, both of which can be and are easily remedied. Again, while there is a risk of methane contamination, the issue can be resolved by properly instilling market risk assessment, i.e. increasing the price of risky behavior relative to thoughtful risk control.

Finally, there is concern that hydraulic fracturing will induce seismic activity. Initially, many thought that induced earthquakes were the result of the fracturing process itself, but if there is a seismic threat, it results from the disposal of produced water—excess fracturing fluid returning to the surface—and/or the flowback—naturally occurring water that flows out of the well following fracturing. If improperly disposed of, this water can lubricate subterranean rock formations, causing them to shift.

Even if slippage can theoretically cause earthquakes, the likelihood that they would be significant is trivial. Research conducted by Arthur McGarr of the U.S. Geological Survey shows that the magnitude of an earthquake has a proportional relationship to the volume of fluid disposed. Roughly 10,000 cubic meters of fluid could yield a maximum magnitude of 3.3, increasing by approximately 0.4 with each doubling of the fluid. By McGarr’s calculations, five million gallons of water would generate, at most, a 3.7 magnitude earthquake—and remember, not all of the five million gallons returns to the surface.

According to the U.S. Geological Survey, such an earthquake would be “felt only by a person at rest…especially on upper floors of buildings. Many people [would] not recognize it as an earthquake. Standing motor cars may rock slightly…similar to the passing of a truck.” Michigan Technological University classifies a 3.7 magnitude as a minor earthquake and estimates that approximately 30,000 of this magnitude occur naturally every year. Again, while a risk, draconian measures like banning or moratoriums are unnecessary given the minimal intensity. Efficient market risk control would be able to prevent improper water disposal mitigating such concerns.

Whatever the risks of hydraulic fracturing, they must be weighed against the benefits. When the Great Recession hit the United States and doubled unemployment rates, one unlikely state—North Dakota—largely escaped the downturn. North Dakota’s unemployment rate only jumped from 3 percent to just over 4 percent between December 2007 and June 2009. The main reason for North Dakota’s resilience was the state’s oil and gas production, which grew steadily during this period. In December 2007, average daily oil and gas production was 136,021 barrels. By June 2009, the average daily production jumped 58 percent to 215,073 barrels. Behind this explosion of oil and gas production was (and continues to be) the hydraulic fracturing of the Bakken shale play.

And the benefits are not confined to North Dakota. A study by IHS Global Insight found that by 2020 hydraulic fracturing production could add an additional $417 billion to the national economy and employ almost three million people.

Good environmental risk analysis asks several questions. What (if any) is the environmental problem? How does it compare to the problems arising from alternative means of energy production? And how can the risks be mitigated? Every form of energy resource extraction and production, even so-called green energy, has its risks. For instance, a giant solar powered “plant” in California uses 350,000 mirrors to focus the sun’s heat on boilers atop a tower to create air temperatures of 1,000 degrees Fahrenheit. During the testing phase, workers found dozens of dead birds, from peregrine falcons to sparrows, scattered around the site.

The data on hydraulic fracturing suggest that its risks are rare, but even rare risks need to be addressed. Addressing them, however, does not require oppressive regulation or production moratoriums. It requires balancing the risks against the benefits and getting the incentives right so that those making decisions are accountable, the topic of our follow-up article.

Editor’s Note: This is the first in a two-part series on the risks associated with hydraulic fracturing and how policymakers can respond to them.

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