A fear of fracking may slow natural gas trend

Natural gas could be a major source of low-cost electricity nationwide, as an upsurge in domestic production drives costs down and looming environmental mandates encourage utilities to retire power plants that run on dirtier-burning coal.

But energy experts and executives at the CERAWeek conference in Houston on Wednesday described a landscape of obstacles still standing in the way of natural gas producers. Chief among them: public fears about water contamination from the hydraulic fracturing process that is essential to unlocking natural gas in U.S. shale formations.

The natural gas industry also is struggling to shed the fuel’s reputation as an unreliable power source prone to boom-or-bust cycles and volatile prices — a big hurdle to getting electric utilities to ink long-term gas agreements.

“The message is just getting out there that there is a lot of supply,” said Guy Buckley, a vice president of corporate development at Spectra Energy, a natural gas pipeline and storage company.

But it will take a while to convince power utilities that low natural gas prices – now about $4 per million British thermal units – are here to stay.

“You’ve got to change some of these big decision-makers like power generators, and those decisions will get made as they become more secure that the shale gale is real, it’s here and that prices are reasonable,” Buckley said.

Energy companies are exploiting advances in horizontal drilling techniques and the hydraulic fracturing process to extract previously unrecoverable natural gas from shale formations across North America – unlocking reserves that could fuel the United States for at least 100 years, analysts say.

Increasing supplies and low price projections already are spurring some electric utilities to retire coal-fired power plants and replace them with gas-based facilities, said John Rowe, CEO of Chicago-based Exelon, one of the nation’s largest electric utilities.

Environmental mandates also will motivate that transition because gas produces fewer pollutants than coal, Rowe said.

Thomas Farrell, CEO of the Richmond, Va.-based utility Dominion Resources, noted that natural gas-fired power stations are cheaper and quicker to build. But, he said, the coal-to-gas transition won’t happen overnight.

“It’s going to take a long time to transition a fleet that was built up over 100 years,” Farrell said.

Natural gas boosters also have a public image problem, said Scott Sheffield, CEO of Irving-based Pioneer Natural Resources, a large independent exploration and production company.

“We were telling Congress and the administration how great our technology was, but the technology failed in the deep-water Gulf of Mexico,” Sheffield said, referring to last year’s deadly oil spill.

That means the industry has a bigger challenge convincing policy-makers that the hydraulic fracturing process is sound and doesn’t contaminate, Sheffield said.

The process involves injecting mixtures of water, sand and chemicals deep underground and under high pressure to break up shale rock and other tight formations to produce natural gas.

Conservationists have raised concerns about the water demands of fracturing. Environmentalists warn that natural gas can escape out of poorly designed and secured wells and that chemicals used in fracturing fluids can taint nearby water sources.

Recent New York Times reports also explored risks posed by companies disposing of radioactive wastewater from the fracturing process in rivers that supply drinking water in Pennsylvania or at sewage plants that are not capable of treating it.

“There’s a risk of losing public confidence in the management of the risks of domestic energy production,” said Jason Bordoff, associate director of Energy and Climate Change for the White House Counsel on Environmental Quality.

The fears are especially acute in the Northeast, where populations that haven’t seen drilling rigs in decades are suddenly inundated by them, as companies rush to produce natural gas from the region’s Marcellus shale formation.

“I think the bulk of that is happening in states like Pennsylvania and New York, where the amount of drilling growth is something they haven’t seen before and the system is not really set up to handle the volume of activity from the public’s perspective,” said Stacy Schusterman, CEO of Samson Investment .

Lower-than-forecast natural gas prices have presented a problem for producers, Schusterman said.

In some shale plays with high temperatures and pressures, such as the Haynesville formation in Texas, the cost to produce natural gas may be higher than the price it can command on the market.

“There is a price below which producers won’t drill,” Schusterman said. But, she added, the economic calculus could change for companies that are able to produce unconventional oil and other liquid hydrocarbons along with natural gas.

Natural gas production in the Haynesville shale may not be economic on its own, she said. But “the economics can work with the liquids.”

Tom Fowler contributed to this story.

jennifer.dlouhy@chron.com

13 Comments

  1. Slim Chance

    If the gas well is has a safe casing design and a proper cement placement fracking is a samll problem. The real problem is getting an operator to use them.

    #1
  2. jake38

    The big question is how quickly will the natural gas deposits in these shale deposits decline in extraction production, and how costly will it be to put in the infrastructure to maintain and transport it. There is plenty of oil and natural gas still locked in the ground, but can the U.S economy afford the price tag of how expensive it will be to get it out?

    #2
  3. Energy Moron

    Good article.

    The water disposal practices mentioned in PA are legacy from shallow gas and coal gas production and are being changed as I write.

    Ditto for the surface casing practices up there.

    The problems associated with PA are legacy from earlier production and are being addressed.

    The earthquakes, like the Guy Arkansas one, are avoidable (well, maybe a few small ones from an unknown fault would happen, but then quick investigation would fine the problem).

    The article is correct… it is an image problem for shale gas, not a real problem.

    #3
  4. Rick

    The only obstacle to cheaper anything is our over bloated government.

    #4
  5. Vincent 1952

    I’ve been in oil and gas for 17 years. Most people don’t realize this but Natural gas USED to be considered a nuisance. We burned it off as fast as it would come out. I bet we threw away about 1/4 of our entire supply in the early days.

    #5
  6. Trail Trash

    Of course those crying wolf get more press than the actual facts, but the State of Pennsylvania released the test results of the discharge waters and found nothing but normal background radiation.

    #6
  7. Dollar

    But Energy Moron, when the EPA falsely accuses Range Resources, like they did on those wells in the Barnett, and then calls all the media to announce their findings …….. then they intentionally contribute to that image problem.

    That was purely a political ploy.

    And then the NYT’s recent ” expose ” , claiming in-fighting within EPA over hydraulic fracturing, that also just creates more fear.

    I don’t think there’s anything the industry can do to fight these fear mongerers. They have no credibility with the general public, who also idolizes their hero actors from Hollywood and believe anything they see on HBO.

    That is a losing battle. And I don’t know how much resource I would commit to fight a losing PR war. I would just concentrate on Congress.

    I also see Obama as a losing cause, there will be no help there. He talks the talk, but he does not walk the walk. The actions of his bureaucrats speak louder than his words.

    This is a tough deal.

    #7
  8. CarlNB

    Only heat your house with heating oil. If your house has natural gas, someone can leave a valve open and your whole house will blow up. I am only kidding just to show that there is danger in everything. We need to make fracking as safe as possible and GO FOR IT! Fracking is being done right now with no problems yet. (Just don’t covert the gas to electrical heating because you can be electricuted!)

    #8
  9. bg

    Dollar- after working as groundwater/environmental consultant for over 20 years, I have come across regulators at both the state and federal level that have an agenda, or should I say vendetta, particularly against the petroleum and mining industries. Most agencies were lacking in training and ability and the qualified personnel deficit that occurred in the 1980s allowed lots of these folks to rise up in these agencies. Of course there were some racalcitrant operators in those days too when prices were tanking. Besides the regulatory tendency is to appease the vocal public minority first and let the responsible parties prove their innocence regardless of what it costs. Besides, there is generally no accountibility for regulators who talk to the media without all the facts.

    #9
  10. Energy Moron

    Dollar:

    The example you use is in Texas.

    Natural gas production is safe in Texas.

    Here are Texas surface casing rules, for example.

    http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=16&pt=1&ch=3&rl=13

    You know, the general public learned about things like centralizers and cement pressure testing during the Deepwater Horizon fiasco; the same things are required for protection of surface water in Texas.

    Don’t mess with Texas.

    Now, here is the joke of the Pennsylvania regulations that were promulgated under a Democratic governor:

    http://www.pacode.com/secure/data/025/chapter78/s78.83.html

    You will note that there is almost as much verbage about protecting coal seams as protecting the good citizens of the Commenwealth of Pennsylvania’s drinking water.

    Now most of the shale gas operators I know about use Texas style surface casing in PA anyway. It is just fundamentally stupid to not do so.

    The media, I think we both agree, needs to stop with the fraccing urban legend.

    There is however a whole lot of serious legacy pollution in PA that predates shale gas I am afraid.

    If the news media wants to investigate this please have at it instead of scapegoating a responsible industry.

    Dollar, though, denying that there is a problem with the PA rules is not helping.

    #10
  11. Whit

    From what I have been able to gather the BP spill in the gulf was a political and a management failure. It was not a failure in technology.

    For some reason we have a foreign interest or entity that is hard at work to prevent us from using our God given resources. Go to the Bible and study the issue on the manna. As I read the account it was to teach the children of Israel responsibility because they had to go out every morning but the Sabbath and gather the manna that seems to have been provided in sufficient amount to feed everyone but not provide a surplus except for the Sabbath. Our resources are here for our benefit and the environmentalists abhor developing those resources so who do they work for? I think there is a lot more in play here than just cheap fuel.

    While reading this it occurred to me that boiling that fraccing water down to sludge would be a good way to dispose of it which would leave little volume to dispose of. Of course, I do not know the composition so there could be reasons against that. Just a thought that may need considerable study.

    To repeat, lets not confuse poor management with poor technology. For instance our green power could be under fine management but it is still poor technology.

    #11
  12. Ray

    Lee, M, Star-Telegram, Texas Supreme Court ruling discouraged suits against gas drillers, December 28, 2009

    The Texas Railroad Commission investigated and found that more than 100 wells in the county “didn’t have enough surface casing to protect groundwater and that records about the surface casing had been falsified.

    A simple Google search turns up dozens of industry studies showing problems with cementing.

    https://docs.google.com/fileview?id=0Bwsxa7SpCLLDZTc1OGEyYzQtOGEwZi00OGJjLWE0MDUtNTQzZTcyMTBmMTYz&hl=en&pli=1

    #12
  13. Dollar

    Wells have been fraced for 60 years, and there is NOT ONE PROVEN CASE of hydraulic fracturing polluting water supplies.

    NOT ONE CASE.

    #13