Gas boom's true promise

Source: http://articles.philly.com, January 3, 2013
By: Thomas W. Merrill and David M. Schizer

In the new movie Promised Land, Matt Damon plays an energy worker in rural Pennsylvania who has a crisis of conscience about the environmental risks of the drilling method known as fracking. But the reality is much more promising than Promised Land suggests. If regulated effectively, fracking can contribute enormously to U.S. growth and energy independence while combating climate change.

The United States has massive deposits of natural gas and oil in shale formations, much of them in Pennsylvania’s Marcellus Shale and elsewhere in the Northeast. For many years, extraction from these formations was not commercially feasible. But this has changed dramatically in the past five years due to the development of hydraulic fracturing, or fracking, which pumps fluid into formations at high pressure, cracking the rock and releasing the oil or gas inside.

As a result of fracking, the United States now has a natural-gas glut. Prices are a third of what they were in 2008 – when we were planning to import the fuel. Last month, the International Energy Agency projected that the United States will become the world’s largest natural-gas producer by 2015, surpassing Russia and Iran, and the world’s largest oil producer by 2020, surpassing Saudi Arabia.

This astonishing turn of events offers enormous benefits for our economy, security, and environment. The decline in natural-gas prices has enhanced consumer purchasing power and triggered a manufacturing boom. Recent studies indicate that fracking has added 1.7 million American jobs and 0.5 percent in annual gross domestic product growth.

In addition, since many of the nations that produce oil and gas are unstable or hostile to America, it is better to be less dependent on them.

Natural gas also burns more cleanly than other carbon-based fuels. The United States has dramatically reduced its greenhouse-gas emissions over the past five years – more than any other country.

Pollution problem

Of course, the picture is not uniformly rosy. Fracking contributes to traffic, congestion, and air pollution, and it uses significant amounts of water.

Yet similar problems arise from other means of energy extraction, such as coal mining and conventional gas drilling. The United States has experience handling these issues, and the Environmental Protection Agency is developing regulations to address fracking-related air pollution.

The risk most particular to hydraulic fracturing – and the focus of Promised Land – is water contamination. Fracking fluid may contain toxic chemicals, so it is important that it not seep into water wells. Natural gas itself can also cause health problems if it migrates into drinking water.

Yet fracking takes place 10,000 feet below the surface, while water wells are usually 500 to 1,000 feet down. This reduces the likelihood that fracking fluid will reach well water.

Although the technology is too new for definitive risk assessments, the evidence so far is encouraging. More than 35,000 oil and gas wells have been drilled using hydraulic fracturing in the United States, and there are no documented cases of fracking fluid migrating into water wells. Moreover, while natural gas commonly migrates into rural water wells naturally, there is little evidence that fracking makes that more likely.

Effective regulation can make fracking safer still. For example, gas wells should be lined with steel and concrete thick and deep enough to prevent leaks, and state oil and gas regulators already require that sort of precaution. It is important to require such practices while exercising restraint so as not to discourage innovation.

Liability solution

To ensure regulatory flexibility, we can rely on liability: Energy companies should be required to compensate for any water contamination they cause. This strategy can spare us the need to specify what is and isn’t permitted up front while motivating energy companies to innovate with care.

Because this approach necessitates accurate liability assessments, we should require an area’s water wells to be tested before hydraulic fracturing begins. This will establish a baseline to determine whether water quality deteriorates afterward. If so, drillers should have to clean or replace the polluted water (unless they can show the contamination is from another source); if not, they shouldn’t. Such a strategy could be implemented by federal statute, though it may be more realistic to rely on the states.

Admittedly, a happy story of energy innovation and reasonable regulation doesn’t make for much movie drama. But the reality is that if we manage shale oil and gas drilling the right way, it has a great deal of promise indeed.

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