Hydraulic fracturing: the current state of play

Daniel M. Steinway and Thomas C. Jackson
Baker Botts LLP
Washington, DC

Hydraulic fracturing is an increasingly important part of energy production in the US. While the technology has been used for 60 years to enhance production from oil and gas wells, today hydraulic fracturing is essential to making gas wells in many types of unconventional formations such as shales economically viable. As a result, this long-standing practice holds the key to unlocking vast domestic reserves of natural gas that can contribute to America’s energy security while helping to address climate change concerns.

Hydraulic fracturing operations have long been regulated by state officials as part of their oil and gas regulatory programs. These programs have been highly successful, allowing hydraulic fracturing operations to enhance recovery of critical domestic energy supplies while protecting water resources. As a result, Congress has seen no need to complicate matters with federal regulatory requirements and as recently as 2005 amended the Safe Drinking Water Act to affirm that hydraulic fracturing is not to be regulated under that statute except in very limited circumstances involving the use of diesel as a fracturing fluid.

Notwithstanding this long track record of safe and effective use of hydraulic fracturing techniques and an absence of any hard evidence that hydraulic fracturing has affected drinking water resources, efforts are underway in Congress and in a number of states and local jurisdictions across the country to impose a variety of new restrictions on hydraulic fracturing. These efforts to impose additional regulatory requirements on hydraulic fracturing have the potential to significantly impact domestic energy production and are unwarranted in light of existing studies which demonstrate that the practice poses little threat to drinking water.

A critical technology

The importance of hydraulic fracturing to domestic energy production is well established. In 1999 the National Petroleum Council estimated that 60% to 80% of all wells drilled in the US in the next 10 years would require fracturing in order to remain commercially viable. As a result, application of hydraulic fracturing to increase recovery has been estimated to account for 30% of recoverable oil and gas reserves in the US and has been responsible for the addition of more than 7 billion barrels of oil and 600 tcf of natural gas to meet the nation’s energy needs.

More recently, in June 2009 the Potential Gas Committee issued its biennial report of gas reserves in the US in which it increased its estimate of domestic reserves by 35% over its prior estimate based largely on the increasing viability of accessing large gas deposits in the Marcellus shale, the Barnett shale, and other unconventional shale plays around the country. It has been estimated that more than 90% of the wells in these formations will have to be fractured in order for them to be viable. Thus, the US has abundant supplies of natural gas but hydraulic fracturing is necessary in order to gain access to it. In fact, a recently-issued study prepared for the American Petroleum Institute concluded that without hydraulic fracturing, domestic production of natural gas would fall by 57% over the next 10 years because of the inability to drill and bring new wells online to replace declining production in existing wells, while domestic oil production would decline by 23%.

The general process used to hydraulically fracture formations has been understood and applied for 60 years and has been made more effective and efficient as a result of years of experience and research efforts. In essence, hydraulic fracturing entails the use of high pressure pumps to force fluid down the well and into the formation. The intent is to pump viscous fluids into the well bore at pressures sufficient to create cracks or fissures in the rock formation to improve the flow characteristics. The process is preceded by careful planning of a particular hydraulic fracturing job in order to maximize the effectiveness of the operation in increasing the flow of oil or gas to the well bore. Throughout the process, well casing (including both surface casing and production casing) and cement prevents the fluids and other materials in the well bore from escaping into shallow formations that may include drinking water aquifers or other formations that have not been targeted for production.

The states have overseen hydraulic fracturing operations for many years as part of their programs for regulating oil and gas exploration and production. As recently documented in a report prepared for the DOE by the Ground Water Protection Council, an organization of federal and state regulators and others concerned with groundwater quality, “state oil and gas regulations are adequately designed to directly protect water resources through the application of specific programmatic elements such as permitting, well construction, well plugging and temporary abandonment requirements.”

These state programs typically include a variety of well construction provisions that are intended to protect surface and subsurface water resources from contamination, including requirements for casing and cementing, while permitting requirements allow state regulators to review proposed drilling plans and ensure that water resources will be appropriately protected. State regulators can and often do impose conditions on drilling and related operations in order to take account of any special environmental or other circumstances with respect to a particular project. These state regulatory programs have been very effective in protecting drinking water sources.

Recent initiatives

Notwithstanding the long history of effective regulation of hydraulic fracturing by state oil and gas programs, various efforts have been undertaken at the federal, state and local level over the past two years to impose additional layers of restrictions on hydraulic fracturing. At the federal level, companion legislation has recently been introduced in both the House of Representatives (H.R. 2766) and the Senate (S.1215) that would require the regulation of hydraulic fracturing under the federal Safe Drinking Water Act. This legislation would result in the imposition of additional permitting requirements for hydraulic fracturing activities and could lead to other unwarranted restrictions on fracturing operations that may result in significant administrative burdens, unnecessary delays and added costs for well operators. In addition, for the first time this proposed legislation would require service companies to publicly disclose the chemical constituents of all fracturing fluids, going well beyond chemical disclosure requirements under existing federal programs.

Efforts to impose additional regulatory requirements on hydraulic fracturing also have been undertaken at the state level. For example, the Colorado Oil and Gas Conservation Commission recently imposed several requirements on service companies and operators with respect to fracturing activities as part of extensive revisions to its oil and gas regulations. While the Commission initially considered adopting very broad disclosure requirements concerning the chemicals used at well sites, after considering the impacts of such requirements on oil and gas production it ultimately adopted chemical disclosure provisions that were similar to existing federal requirements.

Meanwhile, the New York Department of Environmental Conservation is currently considering revisions to its regulations to address proposed high volume hydraulic fracturing operations in horizontal wells drilled in the Marcellus shale and is preparing a Supplemental Generic Environmental Impact Statement to assess the potential environmental impacts of these activities. As part of these actions, the DEC is requiring full disclosure of the formulas of all fracturing fluids proposed for use in Marcellus Shale wells in connection with this environmental review. At the same time, some officials from the New York City Council have called for a ban on hydraulic fracturing – indeed all drilling activity – in the watershed from which the city obtains much of its drinking water.

In the meantime, a bill has been introduced in the New York state legislature that would impose various requirements on hydraulic fracturing and other aspects of drilling in the state. Various other states, including Pennsylvania and West Virginia, also have taken steps to amend their current permitting practices as they apply to Marcellus shale wells.

In addition, several local authorities have proposed new regulatory requirements for hydraulic fracturing. Counties in various parts of the country – including several in Colorado and New Mexico – have recently considered a range of restrictions, with Santa Fe County, NM adopting severe restrictions that could essentially prohibit hydraulic fracturing in that county.

These additional regulatory requirements have the potential to significantly disrupt hydraulic fracturing operations and therefore domestic gas production. A recent analysis for the DOE concluded that the imposition of regulatory requirements on hydraulic fracturing under the Safe Drinking Water Act alone would add over $100,000 to the cost of drilling and operating a natural gas well, rendering some wells uneconomical.

The additional restrictions that have been proposed and in some cases adopted at the state and local level, including restrictions on the types of fluids that can be used in fracturing fluids, extensive approval processes and even outright bans, would further disrupt oil and gas operations in many areas of the country. At the same time, requirements that service companies disclose the formulas of their proprietary products will jeopardize these companies’ trade secrets and provide a substantial disincentive for these companies to engage in the type of research and development concerning fracturing fluids that has proved critical to the development of American natural gas supplies.

No drinking water threat

Despite allegations to the contrary there is no evidence that hydraulic fracturing has resulted in the contamination of drinking water supplies. This conclusion has been confirmed by several studies. The EPA and state regulators have previously studied the potential impacts of hydraulic fracturing on underground drinking water sources and have found no confirmed evidence of any contamination of drinking water wells in connection with hydraulic fracturing operations.

One such study was conducted by the GWPC, which surveyed state agencies responsible for oil and gas production in 1998 and found no evidence of any contamination of drinking water supplies or increased risk to human health due to the hydraulic fracturing of coalbed methane wells. The Interstate Oil and Gas Compact Commission conducted its own survey of member states in 2002 and again found no evidence of contamination of drinking water supplies as a result of hydraulic fracturing operations.

In 2004, the EPA completed a study of the potential impacts of hydraulic fracturing of CBM wells on drinking water supplies; the agency has, in fact, characterized this study as the most extensive review of the potential impacts of hydraulic fracturing on public health ever undertaken. As part of this study, the EPA reviewed information about alleged incidents of drinking water well contamination believed by the affected parties to be associated with hydraulic fracturing or other CBM development activities. Based on its review, the Agency found that, although thousands of CBM wells are fractured annually, there were “no confirmed cases that are linked to fracturing fluid injection into CBM wells or subsequent underground movement of fracturing fluids.” Consequently, EPA concluded that hydraulic fracturing of CBM wells poses little or no threat to underground sources of drinking water (USDWs).

EPA also concluded that any risks to USDWs associated with other types of formations – such as shales – would likely be even less given that hydraulic fracturing of these types of formations would generally take place at greater depths than fracturing of CBM wells and would therefore be even further removed from drinking water sources than fracturing operations in coal beds.

The lack of any demonstrated impact on drinking water as a result of hydraulic fracturing is not at all surprising in light of the nature of hydraulic fracturing activities and numerous factors that weigh against any significant migration of fracturing fluids toward drinking water wells. Among other things, most hydraulic fracturing activities take place at depths far below any groundwater sources that could reasonably be considered drinking water sources. At the same time, companies that are engaged in drilling and completing oil and gas wells use well construction practices such as zonal isolation techniques which help to ensure that fluids in the well bore will not come in contact with groundwater at shallow depths that may serve as a source of water for drinking water wells. Thus, the very nature of the typical oil and gas well construction process itself suggests that hydraulic fracturing would virtually never pose any threat to drinking water sources.

A number of other factors, such as the dilution of any chemicals in fracturing fluids after they enter the formation being fractured and the removal of substantial portions of the fracturing fluids during the subsequent gas production process, also contribute to the lack of impacts from hydraulic fracturing operations. Given these and other factors and the distance that typically separates an oil or gas well and any drinking water well, it is quite unlikely that any fracturing fluids would even approach a drinking water well or a surface aquifer as a result of subsurface migration.

Conclusion

In light of the existing regulatory structure with respect to oil and gas drilling, the nature of hydraulic fracturing and the conditions under which it occurs and the lack of any evidence of harm to drinking water supplies from hydraulic fracturing despite its many years of use, it can easily be concluded that adequate regulatory protections are already in place with respect to hydraulic fracturing. The efforts that are underway at the federal, state, and local level to impose additional requirements on hydraulic fracturing operations are not needed and will result in little benefit in terms of environmental protections while causing significant delays and disruptions in the development of critical domestic gas supplies. As a result, there are serious questions regarding the wisdom of these proposed measures.

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