Home > Shale Gas > Shale Gas is a Giant Loser!

Shale Gas is a Giant Loser!


12/23 Update: For an update on the (un)economics of shale gas production go here, and for an update on the NY Dept. of Environmental Protection’s decision to prohibit hydrofracing, announced on 12/22 go here.

Fellow Folders,

In my seventh fold posts, I focus on the nexus of the 3-E’s – energy, the environment, and the economy.  After years of research, I’ve become convinced that a techno-fix to our 3-E problems simply will not scale up to meet the world’s growing energy demands, and that the best mitigation strategy is voluntary conservation.  The problem, of course, is that while conservation preserves natural capital, conservation stifles the accumulation (and hoarding) of monetary wealth.  Motivated to exploit nature for profit, energy companies have engaged a tactical marketing campaign in which the primary objective is growth at all costs (so long as they are not forced to pay these costs!).  In this post, I hope to convince you that there is a significant risk that we cannot afford the long-term environmental and health costs associated with shale gas production.  I hope that reading this post will help you see through the shale gas hype and motivate you to take a stand against the sinister and predatory practice of hydraulic fracturing (hydrofracing… pronounced hydro-frack-ing).

Let’s begin with the question, “What is shale, and why does it need to be hydrofraced?”

Shale is just one type of rock from which natural gas is extracted.  There is no difference between the natural gas produced from shales and natural gas produced from other rock formations.  Shale rock reservoirs are unique, though.  Most oil and gas is produced from permeable sandstone, limestone, or dolomite source rocks.  By contrast, shale is completely impermeable.  Neither gases nor fluids can be forced to flow through shale.  As a consequence of shale’s impermeability, any hydrocarbons which form in shale are trapped indefinitely.  Drilling a well into a shale gas or shale oil ‘play‘ (field) would not yield a molecule of gas or a drop of oil.  Indeed, shale is mother nature’s finest carbon sequestration system.  And energy companies have decided to systematically release these trapped hydrocarbons (natural gases) and endanger hundreds of thousands of lives, and the economy by doing so.

Why would the natural gas industry do this?  The answer is simple.  The natural gas industry has entered the seventh fold – the point at which increasing production goes from being easy to very difficult or impossible – and at the seventh fold, silly ideas suddenly start to make sense (at least financial sense).  One of these silly ideas involves injecting massive amounts of chemical-laced water into the ground in order to fracture massive shale formations and release and capture some small portion of the trapped gases (methane, ethane, butane, propane, etc.).  Once fractured, the hydrocarbons are released at the fracture site, and are pumped to the surface where they are captured and carted off to a natural gas thermoelectric power plant.  Here is a wonderful diagram ripped from here.

To many people, the idea of fracturing huge masses of solid rock to release some small portion of the hydrocarbons trapped within them sounds like either pure science fiction or the work of madmen.  Of course we accomplished the outlandish task of putting a man on the moon in 1969 just to prove to the Soviets that we were their technological superiors, so perhaps hydrofracing is more the work of madmen than science fiction novelists.   In fact, energy companies began stimulating oil and gas from ‘tight sands’ (sandstones with low permeability) through hydrofracing as early as 1949.  Hydrofracing shale to produce natural gas is a much more recent phenomenon, though, and currently shale gas only accounts for a small portion (less than 10%) of all natural gas production in the U.S..  But if the energy companies have their way, the shale gas industry will grow exponentially over the next few decades.

In their weekly newsletter, ASPO-USA reported that the shale gas ‘miracle’ was a hot topic at CERA Week, the self-proclaimed “leading forum offering insight into the energy future.”  See: Peak Oil Review newsletter (.pdf warning).  This conference was attended by many of the major energy players, and (disturbingly) U.S. Secretary of Energy Dr. Steven Chu.  ASPO-USA reports that shale gas is projected to account for 50% of U.S. natural gas production in 25 years.  Considering that total natural gas production is optimistically projected to double in 20 years (again, this is not likely…), this would mean that by 2035 shale gas production will be nearly equal to total natural gas production today.  In order to get there, shale gas production will have to double every 5 years.  How likely is this, and what would be the environmental impacts of growth at this magnitude?

Let me begin by addressing the all-too-common belief that natural gas is ‘the clean alternative’ to coal.  This selling point is part of the energy industry’s tactical marketing campaign, and while it is true that burning natural gas emits far less carbon dioxide per BTU of energy produced, we must look at the full life cycle assessment of greenhouse gas (GHG) emissions in order to make an honest comparison.  A preliminary assessment of life cycle GHG emissions made by Cornell Professor of Ecology and Environmental Biology, Dr. Robert Howarth, indicates that hydrofraced gas may be worse in terms of global warming than coal produced through mountain-top removal (.pdf warning)  The reason is that according to the IPCC, the short-term greenhouse effect of methane (the lightest of the gaseous hydrocarbons) is seventy-two times greater than carbon dioxide (and over a century the greenhouse effect is still twenty-five times greater than CO2), and enough of the once-sequestered methane percolates through the soil and escapes into the atmosphere during the hydrofracing process to more than cover the difference in CO2 emissions.

But any honest and thorough environmental assessment of hydrofraced shale gas should consider impacts beyond GHG emissions.  Let’s start with water then move on to an environmental justice analysis.

According to Russia expert Steve LaVine (author of: The Oil and The Glory: The Pursuit of Empire and Fortune on the Caspian Sea), Alexander Medvedev, President of Russia’s Gazprom (one of the largest natural gas producers) is doubtful about the future of U.S. shale gas because “the so-called shale gas revolution will peter out, cut short by imperiled water supplies.”  Uh-oh… it looks like there is a risk that hydrofracing somehow risks contaminating freshwater.  This can’t be good for the bottom line…

While the earth is awash in water, the vast majority of water is found in salt-water oceans.  This is great for fish, but not so great for land-lubbing mammals like ourselves.  In the U.S., much of the freshwater comes from fresh-water aquifers.  This is especially true for some of the dryer regions, which unfortunately happen to be where a bunch of the shale gas plays are located.  Even without the risk of aquifer contamination, these regions face a serious threat.  These aquifers are being depleted at rates far exceeding the rates of recharge.  In fact, large swaths of land in the U.S. will likely face freshwater shortages in the next decade or two.

It has been said that “the only way to clean an aquifer is not to pollute it.” So let’s take a step back and think about this hydrofracing process.  First of all, the process is specifically designed to fracture rock, which is to say that the entire process is designed to make fluids flow through rock which would otherwise remain impervious.  Second, toxic chemicals are mixed in with the fracing fluid.  Some of the known chemicals that are mixed in with the fracing fluids are proven cancer-causing carcinogens like benzene and tolulene.  And other chemicals, like biocides, are mixed with the fracing fluid to prevent population explosions (‘black tides’) of hydrocarbon-ingesting bacteria.  So we have a process in which toxic chemicals are mixed with water and injected into the ground in order to allow fluids to flow through otherwise impervious rock.  Third, the industry is hydrofracing shale gas plays in: 1) highly populated areas like Ft. Worth, TX and Garfield County, CO, and Dimock, PA which rely on freshwater aquifers for drinking and irrigation, and 2) areas located upstream to major freshwater bodies like the watershed from which New York city gets its drinking water.  In a word… Brilliant!

So what’s happening in these areas where hydrofracing has already occurred?  For one, pets are becoming ill, losing weight, and losing their hair (link)!  Then there’s the case of the mysterious livestock deaths that just happened to occur next to a hydrofracing site (link).  There are also cases of people becoming sick – err, poisoned (link), and you can even see impressive footage of water catching fire as it flows from a faucet here.  Then  there are documented cases of industrial accidents where frac-fluid spills have contaminated streams and killed fish (link).  And of course, there is the gigantic problem of what to do with the wastewater produced through the fracing process once the drilling has been completed.  If you’re Swamp Angel Energy (no-dookie, this is really the company’s name), the easiest thing to do with 200,000 gallons of chemical-laced brine is to illegally dump it – a violation of the Clean Water Act and a federal offense (link).

From an environmental justice perspective, a geographic analysis of drilling sites shows that the populated places where hydrofracing has been permitted are very poor.  Hmmmm…. I wonder if their is a connection?!  I wonder if poor people are willing to lease their land to energy companies willing to pay a small/large (depending on which side of the bargaining table you sit) fee for the rights to produce natural gas…  I wonder if these same people are influenced by cleverly worded assurances of safety…. I wonder if these same poor people don’t have access to lawyers or other experts that can help them assess the long-term risks associated with hydrofracing?!  Give me a break!  It doesn’t take a rocket scientist to see that these unfortunate souls are the victims of predatory practices!  For a discussion on this topic check out David Broncacio’s interview with documentarian Josh Fox (link), or better yet, get ahold of the documentary itself!  In this interview, Josh Fox also offers insight regarding the reasons why revenue-strapped states, who are in charge of regulating the industry, would perhaps intentionally turn a blind eye, or at least not make the decision to adequately staff and fund the state’s regulatory agencies.

Fellow folders, among the gloom, there is a bright spot on the horizon!  It’s called the sun!  But renewables – the only true alternative to fossil fuels – simply will not scale up to meet current energy demand.  We absolutely must work out a voluntary conservation strategy!

Furthermore, we absolutely must urge our representatives to support the FRAC Act – which essentially gives the EPA power to regulate the shale gas industry.  Yup, that’s right, the Fed’s are not permitted by law to regulate this industry because the Energy Policy Act of 2005 specifically exempted hydrofracing from regulation under the Safe Drinking Water Act!

Thanks for reading!  I hope I’ve motivated you to do something about this impending environmental, economic, and health catastrophe.  We are confronted with enough seventh fold challenges already.  There is no need to accelerate the seventh fold freshwater challenge by allowing shale gas companies to become wealthy at the public’s expense!

For more information on the topic, I highly recommend ProPublica’s great coverage.  Here is a link to the many great articles written by Abrahm Lustgarten (and a few others).  And here is a link to a great Democracy NOW! video on hydrofracing, and the interview of Josh Fox whose documentary Gasland, The Movie is earning well-deserved critical acclaim.

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  1. April 4, 2010 at 8:59 am | #1

    Wow. Thank you for all the information. I think I will probably read this and the related links a few times over.

  2. Carol
    April 4, 2010 at 9:04 am | #2

    This article provides clean energy–motivational energy–for action in support of the FRAC Act. Can you believe the footage of the flames coming from the kitchen water faucet?! Everyone should watch the link to the interview with the filmmaker Fox! Share it with your friends! I’m anxious to see the full movie, depressing as it may be.

    Hope everyone writes their representatives! Let’s not let the industry trade fracing for mountain top removal – access to clean water should be a right of every man, woman, child, pet, farm animal, plant…

  3. April 4, 2010 at 10:42 am | #3

    I logged on to another computer, and sitting in front of me was the link that I had meant to add to the discussion of biocides. It’s there now… and here it is again:

    http://www.bloomberg.com/apps/news?pid=20601109&sid=aINvzI7k5xYY&pos=14

  4. April 4, 2010 at 12:26 pm | #4

    Great review.

    Profit and growth are the concepts that needs to be reevaluated globally. When is enough enough?

  5. April 8, 2010 at 12:08 pm | #5

    Derik, you’re right, since I did a story on hydrofracing of tight sands in Wyoming, I am interested in how natural gas extraction is playing you. We’ll definitely have to catch up on this–and the rest of the energy concerns–in person. With beer, chili, and maybe even darts.

    I’m going to read through the rest of the posts–but I thought I’d ask you now–I’m sure a lot of people know what they can do, but I’d like to hear from you what you think we can do as a society. You know, the small things that cumulatively will have a big effect. People don’t like to radically alter their way of life, but many do care.

  6. April 8, 2010 at 12:51 pm | #6

    The first thing that society needs to do is recognize that the current system is dysfunctional, and that our collective expectations must be adjusted to the reality that we have hit the seventh fold – material and energetic constraints are not a problem for future generations, but an unwelcome reality that is affecting us TODAY.

    The signs are all around us, yet society prefers to wear blinders. If we’re not at the seventh fold, then why are we hydrofracing shale gas? And why are we removing entire mountains to get at a bit of coal? And why are we mining the canadian tar sands for bitumen? Why have oil exports peaked? Why has total U.S. public and private debt risen to nearly 4 times the level of GDP?

    Why, with all this wealth that we have been able to accumulate over the last 50 years do we have a shrinking middle class in the U.S.? Why do people go hungry in the land of plenty while CEO’s bicker about multi-million dollar bonuses? Perhaps ‘bandit’ was on to something when he said “Humans have nothing left to exploit but each other, and that is how it is playing out.”

    Paul Hawken (of Natural Capital fame) eloquently points out that “we are the only species on this planet without full employment. Brilliant.” The system is dysfunctional, and it needs to be either fixed or abandoned.

    So, what does society need to do? First we need to recognize the true meaning of the word scarcity, conserve the natural wealth we have today, and use our precious resources to build out a renewable energy system. We need to stop building new roads (especially roads to nowhere). We need to stop the corn subsidy (and others), and start supporting local, organic farms. We need to build resilient communities and re-learn what it means to be a ‘neighbor’. We need to begin consuming experiences rather than material goods. We need to send bailout money to *people* not corporations. And we need to break the trend toward specialization. We have too many people whose knowledge base is an inch wide and a mile deep. We miss the forest for the trees.

    Finally, we need to articulate a clear set of objectives and expectations of our elected officials, then exercise our rights as citizens in a democracy and demand actions that move us toward meeting these goals.

    It won’t be easy. There’s a lot of money, misinformation, and propaganda being thrown around.

    But as Herman Daly (one of the thought leaders of ecological economics) once said, “In choosing between tackling a political impossibility and a biophysical impossibility, I would judge the latter to be the more impossible and take my chances with the former.”

    Or, as Paul Hawken put it, “Don’t be put off by people who know what is not possible. Do what needs to be done, and check to see if it was impossible only after you are done”

    BTW, you should add a link to your photo essay on hydrofracing!!!

  7. Matt
    April 13, 2010 at 8:37 pm | #7

    Really interesting piece! You make a strong case why shale gas _shouldn’t_ grow as advertised by the industry. You also state that you think this type of growth in shale gas production is _unlikely_. In your opinion, what factors (other than it being a bad idea from an environmental and public health perspective) make this unlikely?
    Obviously environmental and health damages have measurable economic impacts, but I wonder if that will be enough to halt shale gas expansion. Is it simply that with regulation (e.g., FRAC Act), shale gas will become uneconomical?

  8. April 15, 2010 at 10:58 am | #8

    There are a number of factors that lead me to believe that shale gas won’t grow as quickly as advertised. First, let’s take a look at how fast the industry is promising growth. The industry is promising nothing short of a doubling of output every 5 years. At this rate, shale gas production will be as great as *total* gas production is today in just 25 years. Can you think of any industry that has been able to double in size every five years for a couple of decades? Especially one which is so capital intensive?

    Second, think about the public backlash that the industry already faces for their haphazard environmental practices. The dangers that I wrote about will only become more well understood and widely known over the next few years. In order to grown to 30 or 40 times their current size (as promised), the shale gas industry will have to encroach on the water resources which serve *hundreds of thousands*. Imagine how much more backlash they will face during this period of growth.

    Third – and this is important – there is good reason to believe that the individual well and field production curves are *very* different from the production curves of conventional gas plays. Shale gas fields have a far shorter life span, a much higher production peak, and much more rapid rates of decline. Consequently, much of future production will counter rapid declines elsewhere rather than growing total ouput.

    Art Berman, an independent petroleum geologist, consultant, and (former) columnist for the industry journal World Oil, has been covering the shale gas story for years. Art recently penned an article titled “Facts are Stubborn Things” which was pulled at the last minute after World Oil received pressure from a top executive at Petrohawk Energy (a major shale gas player). After the article was pulled, Art quit his gig as a columnist, and World Oil editor Perry Fischer was fired.

    Fortunately, ASPO-USA ran the article – which mostly covers the (un)economics of shale (http://www.aspousa.org/index.php/2009/11/facts-are-stubborn-things-arthur-e-berman-november-2009/), and further insight into Art’s arguments are articulated on the .ppt presentation which he gave at the 2009 ASPO-USA conference (http://www.aspo-usa.com/2009presentations/Art_Berman_12_October_2009.pdf).

    In short, Art argues (and empirically shows) that:
    1) decline rates for hydrofraced shale gas plays are far more accelerated than those of conventional plays, but the models that the industry uses to forecast future production use historic data trends. (My note: This is very similar to what rendered the gaussian mortgage default models – which were based on historical data in which housing prices only increased, and foreclosures were not correlated – inaccurate). In this case, the production curve for a conventional gas play is wide and gentle, while hydrofraced shale is very steep and very short. As Art puts it, “It does not seem logical that type-curve methods should be more reliable than individual well decline-curve analysis. If the pattern of well decline is empirically exponential, it makes no sense that it should be treated as hyperbolic for conceptual reasons or because of a preference based on production from higher permeability reservoirs that are not comparable to those in the Barnett or other recent shale gas plays.”

    2) Because the decline rates are inaccurate, the estimation of total reserves is likely far too high.

    On the economics, Art shares additional insights. Here I am quoting at length the article cited and linked above:

    “Shale plays typically begin with a leasing frenzy whereby major players accumulate hundreds of thousands of acres, often at astronomical bonus prices. Next, a drilling campaign ensues driven more by lease expiration schedules-typically in the 3- year range-than by science. Only after considerable capital has been destroyed in this manner are the core areas recognized. This “Braille method” is completely opposite to the customary approach to E&P projects, where a cautious approach based on science is used to high-grade focus areas.”

    Oddly enough, the so-called ‘Braille method’ is industry ‘best-practice’.

    Thanks for the comment, Matt. I hope that you are satisfied with my response.

  9. Matt
    April 18, 2010 at 3:14 pm | #9

    Great response, with more excellent information – thanks! On total reserve estimation, to be devil’s advocate for a second – Exxon is making a huge bet on shale with the XTO acquisition, their biggest (I think) since buying Mobile. There are other signs of big oil believing in (and buying into) the shale gas but this is a big one. Exxon is a very conservative company which doesn’t often put money (or shareholder equity) at risk unnecessarily. So while I’d never believe PR from them (especially regarding the social/environmental costs of shale gas drilling, whether/how to address climate change, etc., etc.), they’ve really put their money where their mouth is here. In short, I don’t think they’d do the XTO acquisition unless they were pretty confident they could make money in the long run on the deal. (In fact they are saying they don’t expect the deal to be accretive in the first couple years and that it is a long term play.) Now obviously their analysis could still be mistaken, but I’m just saying they’ve likely looked into it (i.e., XTO’s reserves which are largely shale as well as prospects for “non-traditional” gas resources generally) pretty carefully. Of course you may reason that Exxon and others simply have no choice and need to roll the dice on shale given that opportunities for the non-state owned majors are in decline, but IMHO anyway Exxon’s move here is a very calculated risk. My guess is that Exxon is aware of the rapid decline rates and other factors that make shale more expensive than many traditional modes of fossil fuel extraction but nonetheless think they’ll be able to make money at it (XTO as an independent certainly has been!). Now obviously the total commercially recoverable reserves could still be overstated (a debate, along with the social/env impact concerns, that is highly relevant to national energy policy as Art argues). However, it does seem clear that we have a very significant resource here that the majors (and smaller companies) will continue to extract unless an equal and opposite force is applied!

    Also worth noting – until the deal closes (perhaps in a few months) Exxon gave themselves the right to back out if something like the FRAC act is enacted! (Although, in the fear of regulation vein, I found this article among ProPublica’s coverage that you recommended quite interesting: http://www.propublica.org/feature/underused-drilling-practices-could-avoid-pollution-1214)

    • April 19, 2010 at 9:46 am | #10

      Matt,

      It’s good to see the devil’s advocate being played. Let me give a short response.

      All of the fossil fuels (oil, natural gas, and coal) are reaching the seventh fold. Raising production is getting much more difficult and far more energy intensive. All the while, the world population grows, and significant numbers of the world population are seeing a rise in personal incomes – and purchasing power.

      Control over scarce energy resources which won’t likely be replaced by alternative renewables is strategic. Overstating shale gas reserves gives the producers powerful lobbying power. We’ve all heard the mantra: “The US is the Saudi Arabia of natural gas, and natural gas is the ‘clean’ choice.” And the fact that reserves are likely lower than stated doesn’t really matter anyway. The flow rate is what really counts. And if we get even more hooked on natural gas, and the flow rates fail to meet our expectations, what happens? The price goes up!

      I agree that Exxon is making a calculated risk, and that rising scarcity mixed with increasing demand means that there is a good chance that they (and many others) will make money on the deal.

      This does not mean that shale gas is not a giant loser, though!

      Why? Because natural gas producers are extracting and making a profit (on a public good), but are not burdened by even a small fraction of the negative externalities that they are generating.

      If you add in the true costs of production and consumption – health impacts, water impacts, environmental impacts in general – then shale gas is definitely a loser!

      Thanks for the question! Keep ‘em coming!

  10. MWD
    May 7, 2010 at 9:07 am | #11

    I wasted too much time reading this article. There is so little information, just speculation, and links to anecdotal “evidence”. “My doggy got kilt on an electric fence, them cows musta dun it”

    • May 7, 2010 at 9:57 am | #12

      MWD, You could have stopped reading at any time, but thanks for reading all the way to the end.

      Sorry to hear about your dog.

  11. April 30, 2012 at 6:56 am | #13

    What a great write-up on shale issues. I am researching the site ShaleStuff.com for a writer there anyhow and I think it is difficult to determine any of the facts when you have two distinct pools of scientists working on the evidence, one party working for the Greens and the other for the Energy Industry shaping the facts to match their narrative. I think the general public wants to know what the true cost is. They are not all idiots and know that any industry will bring some kind of environmental impact, the question is how much? what are the safely measures in palace? what is in it for me? my family, my community, my county my state? Is it worth it? Anyhow the site I work for is dedicated to the Communities Impacted By The Shale Gas Drilling Industry and we have been covering these fracking shale gas issues from center. It written in short easy to digest bites . It has all kinds of information about shale drilling, jobs, news. http://shalestuff.com/ check it out and let me know what you think..

  1. April 21, 2010 at 10:10 am | #1
  2. May 3, 2010 at 10:32 pm | #2
  3. September 13, 2010 at 9:32 pm | #3
  4. September 17, 2010 at 9:09 pm | #4
  5. December 23, 2010 at 12:24 pm | #5

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