My Feelings on Fracking

The New York Times had another article on the environmental impacts of shale gas drilling, which reminded me that I had intended to write something else on the subject after February’s post on the fracking panel at AAAS, but never got around to it. The hook for the article is yet another study showing that the environmental questions are more complicated than just the question of how much CO2 is released in burning gas vs oil or coal, with loss and leakage during the drilling process potentially producing a lot of greenhouse gases.

This is, of course, a single study, and includes the obligatory dismissive comment from an industry spokesman, but also this bit toward the end, from somebody with a more environmental organization:

David Hawkins, the director of climate programs with the Natural Resources Defense Council, said that much could be done by regulators to nudge drillers to capture more of the fugitive methane, but that it is often more economical for industry to simply let it escape.

Mr. Hawkins also said that too little was known about just how much methane was being lost and vented, and that studies like Mr. Howarth’s, while needed, relied on too slim a data set to be considered the final word.

The end of that first paragraph really goes to the center of what I think about the issue. This is, of course, strongly colored by having grown up in Broome County, where they are now considering how to develop the gas-bearing shale deposits underneath the region. To a large extent, this strikes me as a case where the community potentially has a great deal more power than is usually the case when negotiating with major industries, and industry is to a large extent trying to keep them from realizing it.

To my mind, there are two absolutely critical facts that need to come into any analysis of developing these resources:

1) Shale Gas Doesn’t Spoil: The gas deposits in question have been underground for millions of years, and will remain underground for millions of years more without significant degradation. This isn’t a situation where immediate action is required– the gas will be there to be drilled at any time in the future.

2) Natural Gas Is Finite: While the US has large quantities of natural gas, including those in the Marcellus Shale, the total amount of such gas is limited, and will eventually be used up.

There are both good and bad aspects to these points. Taken together, they mean that if the affected communities in the Souther Tier want to use it, they have a great deal of power to dictate how the gas is developed.

That gas is going to be there until and unless somebody drills it out, so there’s no hurry to extract it. And as other gas reservoirs run down, the value of that gas is only going to go up, as the price of gas increases.

And that’s the critical factor to keep in mind when people– whether industry representatives or people from environmental groups– talk about the economics of various measures. When somebody says that doing this or that “isn’t economical,” what they mean is that doing that thing– whether it be capturing leaking gas, or protecting drinking water or other natural resources– would make the price of extracting the gas high enough to cut into the profits of the people doing the drilling, at the current price of natural gas. If that price goes up, though, then what counts as “economical” changes.

That is, after all, the entire story here. This gas isn’t something new– it’s been there for millions of years, and it’s been known to be underneath New York and Pennsylvania for years. Nobody has drilled it out before because it wasn’t economical to do so– the price you could sell the gas for wasn’t high enough to justify the hassle of getting it out of the ground. As technology has improved and demand has increased, though, it’s started to look like a better deal, leading to the current rush to exploit the Marcellus Shale.

But the thing is, as time goes on, the extraction technology will only get cheaper (as it’s refined in places where they’re already drilling), and the price of the gas will only go up (as other sources run down, because gas is finite). That means that what isn’t economical now will become economical down the road, if you just wait.

This potentially gives local communities a great deal of power to dictate terms: to set minimum standards of conduct for the companies drilling the gas. If meeting an acceptable level of environmental protection– both things like recapturing leaking gas before it contributes to global warming, and also things like making sure shoddy construction practices don’t contaminate streams and drinking water– would make the profit margins too narrow today, that’s fine. The gas will still be there later, when technology and economics make it financially acceptable to get the gas out in a responsible manner.

I realize, of course, that this is easier to say from my perspective as somebody with a stable income living elsewhere– if I were collecting unemployment in Binghamton, I might feel differently. I hope I’d still be able to take the longer view, but I acknowledge that this is a real problem.

And, in a sense, the problems of the region actually serve to underline the importance of caution and negotiation in this case. Because really, the economic troubles of the region can be traced to the loss of manufacturing jobs thirty-odd years ago. And too-hasty development of the natural gas resources will set the region up for exactly the same sort of catastrophe down the road– the children or grandchildren of people living there now will bear the brunt of the next great collapse.

Because, remember point 2) above: the gas is a finite resource. And unless some serious planning is put in now, when the gas is gone, the money will go with it.

So, as this resource is developed– and really, if you think it won’t be developed, you’re crazy– it’s absolutely critical to think long-term, and use the money coming in to prepare the region for life after gas. That means things like investing in development that is sustainable over the long term– reconfiguring the existing communities to make it easier to use less energy when the time comes– and doing whatever can be done to build up resources that won’t run out– investing in education and infrastructure to draw other businesses in, rather than depending entirely on the exploitation of a single natural resource. We’ve got ample evidence regarding what happens to a region that depends on a single resource when that resource runs out, and I don’t want to see that happen to the area where I grew up.

That kind of planning necessarily means taking a hard line on both the environmental issues– making sure that when the gas is gone, it’s still safe to drink the water, and there are still fish and wildlife and the other natural resources of the region– and also on economic ones. Politicians shouldn’t be looking to give tax breaks to drilling companies, or waive regulations– on the contrary, they should hold the line as strictly as possible, and get every penny possible out of the process. That money’s going to be needed to soften the shock when the gas eventually runs out, and something else has to take its place.

This is, of course, exactly the opposite of the line the gas companies are pushing. Their whole business model involves trying to obscure those two key facts above. If they can get local communities to cut hasty and foolish deals right now, then they’re golden. They’ve got an immediate source of profits, and those profits will only go up.

And make no mistake, those companies do not have the best interests of the region at heart. Yes, they’re going to provide a huge influx of cash, but the money coming in will be dwarfed by the money going out. And the people cashing the really fat checks– the executives of the companies running the drilling operations– aren’t from the region, and won’t be moving there any time soon. As I understand it, most of the people doing the actual drilling won’t be from the region, either– they’ll bring in crews from down South to do the work, and get most of the pay. What gets out to the community will be table scraps– service industry and support jobs that will dry up the minute the gas does.

Which means it’s critical to take a hard line now, and use the power provided by those two key facts above to get the best deal possible. They’re the difference between developing a resource for the community and exploiting a resource for the benefit of people who aren’t from there, don’t live there, and don’t give a damn about what happens once the gas stops flowing.

I’m not opposed to drilling per se– as I’ve said before, it’s potentially the first really good economic news for the region in my lifetime. I want to see the gas developed, but I want to see it done in a responsible manner that preserves as much as possible of the place where I grew up, and where my parents, aunts and uncles, cousins, and friends still live. I want to be able to go there with SteelyKid as she grows up and show her around with a sense of pride in the good things that the region has to offer, rather than regret over what was lost in a needless rush.

Comments

  1. #1 Eric Lund
    April 19, 2011

    Well said.

    Lots of places in the US, to say nothing of the rest of the world, have seen this movie before. You see it in the many ghost towns of the west (where the drier climates mean wooden buildings take a lot longer to decay) and in the coal country of Appalachia (where they have resorted to even more extreme measures to mine the coal, including wholesale removal of mountain tops). It’s the same story with the tar sands of northern Alberta, exploitation of which is a money losing proposition with $50/bbl oil but profitable at $100/bbl. Places that have been abandoned, permanently (at least on the scale of a human lifetime) mucked up, or both, in the process of extracting some finite resource until it’s no longer economically viable to extract what’s left. It makes sense for the locals to hold out for the best deal they can before the drilling/excavation starts. It also makes sense for the extraction companies to target less well-off areas because those places have less ability to hold out for favorable terms.

  2. #2 daedalus2u
    April 19, 2011

    Your point about the gas still being there hundreds of years from now is well taken.

    There is gas that is not in such stable formations, methane hydrates on the ocean floor are not that stable and if global warming raises sea temperatures enough they will become unstable and release methane to the atmosphere.

    It would be better to capture those unstable methane hydrates and burn them to CO2 before global warming releases them as methane.

  3. #3 Joel Rice
    April 19, 2011

    I had the misfortune of being sent to record the Alaska oil pipeline hearings back in the seventies. Arrogance on display big time. They acted like they had already bought off all those who needed to be paid off, and resented anyone else. I had no opinion at the time, but went away annoyed at their whole attitude – then to top it off they tried stiffing me for the expenses.

  4. #4 Pat Meadows
    April 19, 2011

    My husband and I are refugees – driven from our home in Tioga County, PA by the natural gas catastrophe now unfolding in that area. It’s the epicenter of fracking now.

    The local political climate (highly conservative) has meant that NO efforts to alleviate the horrible effects of uncontrolled, unregulated drilling have taken place. The PA state legislature has made a bad situation worse, far from helping.

    I don’t want to go into details, I’ll start to cry. It’s not easy to start over at my age – I’m 67 now. Even my husband (younger than I) has had trouble adapting and adjusting.

    We left the home we’d expected to spend the rest of our lives in with great sadness. We left an area of tremendous natural beauty, indeed one of the few almost-unspoiled areas in the northeastern USA, with even greater sadness. What’s happening there is horrid. We also of course left friends and neighbors with great regret.

    We’re out of the Marcellus Shale area now, right up in northern Maine. We don’t especially like it here (huge quantities of snow all winter and black flies all summer) and the house we bought here isn’t nearly as nice as the one we left. But this is the best we could do.

    We can only pray that nothing valuable will be discovered in this area.

    I’m just writing this to add another viewpoint. It does *not* need to be this way. My husband and I, like you, are for extracting the gas. But we favor extracting it in a manner such that lives are not ruined, and the countryside and natural beauty are left unharmed. This could be done. It wouldn’t cost much more than the disaster that’s occurring now.

    It’s the same old story: privatize the profits, socialize the costs to the environment and to people in the area.

    Pat

  5. #5 Omega Centauri
    April 19, 2011

    A pretty good post. I’ve followed the discussions on realclimate, and the oil drum, so I’ll add my two cents:
    Your logic points are are valid.
    I get the impression the recent study probably overestimates the fugitive emissions, if I had to make an educated guess I’d say perhaps by about 2x.
    The issues of both fugitive emissions and water pollution need to be handled by regulation and enforcement. Areas with longterm experience with gas production generally have good enforcement, and problems are not so widespread. Some of the newer areas, with naive regulators (and perhaps ideologiv resistance to regulation) seem to be having some serious teething issues. This is not unfixable, but it requires some political will, which I hope is not lacking.

    About the finite nature of the resource. That is of course important. We are fighting an intertemporal war here, current consumption versus future, and the future consumers don’t seem to have a vote. The way to respond to drill-drill-drill, is to reply that it really means drain-America-first.

    Current nat gas gases are very low, it is not at all apparent that current drilling efforts aren’t a bit of a financial scam. We probably need a price 50 to 100 percent higher for this investment to make sense.

    Landowners, can make good money selling drilling rights to their properties. Make sure you negotiate a good deal if you are in this situation. Some depressed rural areas could make substantial revenues, that might allow some current residents to afford to be able to stay.

  6. #6 Jim
    April 19, 2011

    First of all, for disclosure, I should point out that I’m an engineer directly involved with shale gas development in Canada (not the US). I’d appreciate it if you please kept any insults and derogatory comments to yourself.

    Contrary to what you think I may say next, I think this is a really good article. I completely agree that the gas isn’t “going” anywhere, and we, as oil and gas companies, should take steps to ensure that development occurs in a sustainable method that benefits the communities we work in in the long-term. I like to think we do a pretty good job of that up here compared to our American counterparts, partly because of a culture difference and partly because of much stricter government regulations and social expectations.

    The problem, in my opinion, with development is the “drill-baby-drill” attitude. Everything seems to come down to NPV, NPV, NPV. Everybody wants to make money now, with little regard for long-term development. In a way, I do understand it because shale gas economics, unlike conventional oil and gas, are heavily dependent on achieving economics-of-scale. That being said, there needs to be a balance between economics and wise development. How to achieve that is beyond me. Sometimes I think we should send our executives and their families out to live in the areas we develop and see how their attitudes change…

    Anyway, I didn’t really have a point to make, but just wanted to show that even us people involved in shale gas development understand that not all is well.

  7. #7 Karl
    April 20, 2011

    I happy to see such a even-handed and well reasoned response to what was, in my opinion an inflammatory article (or series) from the NY Times. I agree whole heartedly that the region should invest this boon wisely and take the so called “long view.” Also to chime in on some important points others have commented on… lacking regulation is the real problem here. It is hogwash to assert that it’s the new drilling/fracing of the shale several thousand feet below the deepest groundwater reservoir that might cause contamination. Contamination comes about from careless companies being cheap with the wastewater treatment at the earth’s surface. This is fixable, and will be fixed with better regulation.

    Regarding post 2; that’s an interesting proposition. Keep in mind that mining methane clathrate on a commercial scale would require some pretty nifty technological advances, since it is only stable in such narrow P/T conditions. I think the Japanese are interested in this, but I’m not sure how they are planning to do it.

  8. #8 Bob
    April 21, 2011

    I haven’t seen any references to the Gasland Documentary. If you Google Gasland you will find a plethora of references. A good place to start may be
    http://en.wikipedia.org/wiki/Gasland
    I saw the documentary and showed my wife who has royalty rights to some of the Bakken area.
    Very interesting and good blogs.
    I do not feel the references to using up the natural gas are very realistic. First of all, they are immense. Second, long before then we should be getting enough petroleum products from Pond Scum/Algae to obviate these arguments. I do believe that the technologies that drive the need for carbon fuel will also solve the problems. I am a chronic optimist.
    New to this site/blog. Shall return. Good stuff.
    peace, bob

  9. #9 Omega Centauri
    April 21, 2011

    Yes, Bob, you are an optimist. Reserves are huge, but how much is economic -and at what price (of gas). It remains to be seen how far shalegas can go. It takes a huge number of shalegas wells to replace a conventional gas well, we may struggle to replace the conventional gas as it depletes. And shalegas wells themselves deplete rapidly, so your net rate of production with a constant number of drill rigs will plateau pretty early. And the most promising locations are drilled first, so there is always a race between improving technological capability, and decreasing quality of ore quality.

    Algae, and pond scum seems to be going precisely nowhere. We will probably have over half our energy from wind/sun long before we get 1% from algae. Isn’t Bakken shale an oil play (mostly in North Dakota)? I wasn’t aware it was being drilled for gas.