By Larry Bell Remember all that talk about the importance of energy security and independence from foreign oil? What if it is right there trapped in oil and natural gas-bearing shale, enough to possibly supply our U.S. needs for centuries? Wouldn’t it be a pretty good idea to use it? Well, lots of people obviously don’t think so. They’re very determined to make sure is remains right where it is. And where is that? It’s located in 167 shale oil field deposits about a mile or more beneath the surface that are distributed among several states. According to the U.S. Geological Survey, one known as the Green River Formation (also dubbed the “Persia of the West”) may alone hold more than 1.5 trillion barrels of oil — six times the proven reserves of Saudi Arabia. Leasing rules established in 2008 by the George W. Bush administration would have opened up about 2 million acres of that federal land in Colorado, Utah and Wyoming to leasing rules. That was before the firm Earthjustice filed two federal lawsuits in January 2009 on behalf of 13 environmental groups to block those rules, claiming that the oil shale production techniques hadn’t been perfected or reviewed, and that the royalties to be paid to government were too low. Interior Secretary Ken Salazar then announced that the Obama administration is taking a “fresh look” at the Bush oil shale leasing rules, presumably in response to environmental lobby objections. He is well known for demonstrating kinship with their purposes, as demonstrated by actions following the Deepwater Horizon disaster in the Gulf of Mexico when all deepwater rigs were shut down while the administration took a different fresh look at safety rules and procedures. A de facto moratorium still continues in the form of a punishingly slow permitting process. As a result, the U.S. drilling industry in the Gulf of Mexico has collapsed, output has dropped, rigs have relocated to foreign shores, and at least one drilling company has filed for bankruptcy. This has occurred despite the fact that U.S. District Judge Martin Feldman held that the administration had been in contempt of court for trying to reinstate it after he had already issued an injunction on grounds that such actions were too broad in scope and unjustified based upon available evidence. Of course, our government is really only doing its job to protect us, and once again is calling upon top experts to guide policy decisions. On May 5 Energy Secretary Steven Chu announced the appointment of a seven-member panel to come up with new fracing safety standards that address concerns raised by environmental opponents. They include such domestic energy enthusiasts as former Al Gore aide and secretary of the Pennsylvania Department of Environmental Protection Kathleen McGinty, and Fred Krupp, president of the Environmental Defense Fund. This panel is remarkably similar to the one convened by Salazar that sanctioned the current offshore drilling debacle. The safety methods in question involve “fracing,” a method that pumps water containing small percentages of other materials into the porous shale under pressure to hydraulically fracture it and release the trapped oil and gas. Those materials vary, and may utilize sand, nitrogen, carbon dioxide, air and other substances. Steel casings and cement prevent the fluids from entering wells and underground reservoirs. The process has been used successfully without a single documented case of site contamination over more than 60 years. More recent techniques apply horizontal drilling to extend operations into adjacent underground deposits. These new methods are transforming oil and gas extraction productivity. The enormous Bakken Formation that extends between North Dakota (the primary area), South Dakota, eastern Montana and Canada’s Saskatchewan providence is an important example. In 2005 North Dakota produced a total of about 100,000 barrels of oil per day, while today the daily output is running at 250,000 barrels from the Bakken deposit alone. Not surprisingly, Bakken fracing has active critics who object that the process utilizes diesel fuel and solvents that can cause environmental harm. John Harju, associate director at the University of North Dakota Environmental Energy & Research Center believes this issue is exaggerated. Drillers recover 90% of these fluids, and those that aren’t collected remain in oil reservoirs some 10,000 feet below the surface. He maintains that “The lowest-most occurrence of fresh water tends to appear at 2,000 feet deep or less.” The biggest, most headline-winning fear is that fracing chemicals will contaminate drinking water. This narrative got a large boost following an April 19 accident at a Chesapeake Energy Corp. natural gas well in Pennsylvania about 25 miles south of the New York state border. The accident spilled chemicals into a nearby stream, forcing evacuation of nearby residents. Workers rapidly stopped the leak, no one was injured and state authorities reported that any environmental impacts appeared to be minor. Nevertheless, the incident heightened opposition to drilling in another massive shale deposit, a 65 million acre Marcellus Formation, the world’s second largest natural gas field, extending from Ohio and West Virginia up through Pennsylvania and upstate New York. Subash Chandra, an energy analyst for Jeffries & Co. commented that “Even minor blowouts like this don’t help the cause.” He was clearly correct. The Pennsylvania Department of Environmental Protection promptly sent Chesapeake a “notice of violation,” the first step in enforcement proceedings. The filing asked the company to explain “why it took Chesapeake nearly 12 hours to address the uncontrolled release of fluids off the well pad” and why it took 12 hours to get a well-control company to the site. The company responded that it had a well-control specialist on the scene in 30 minutes, not 12 hours. Challenges to Marcellus drilling didn’t begin with the Chesapeake event. Three years ago New York’s powerful green lobby represented by its Department of Environmental Conservation announced plans to rewrite all fracing regulations, and stop all permits, even outlawing vertical fracing. Although Governor David Peterson ultimately vetoed this, he issued an executive order that backs an agency ban on horizontal fracing, (the most effective method) until new regulations are released. The EPA subsequently convened public hearings in Binghampton, New York as part of their investigation into the human health and environmental effects of fracing in March of 2010. And while the Energy Policy Act of 2005 prevents the EPA from explicitly regulating fracing wells under the Safe Drinking Water Act, both the EPA and the Ground Water Protection Council, a nonprofit made up of state regulatory agencies, have published studies determining that no documented evidence of fracing-sourced groundwater pollution has been found. But never underestimate its willingness or ability to exercise regulatory authority under other existing laws. On August 31, the EPA quietly released interim results of its ongoing review of possible drinking water contamination at several sites near Pavillion, Wyoming. Kevin Book, an energy expert with ClearView Energy Partners, an energy market research firm, reports, “Although EPA’s latest data did not conclusively link contamination to fracing, EPA’s guidance that residents should avoid drinking the water may give Congressional fracing opponents a valuable sound bite to use when calling for mandatory disclosure rules [identifying chemicals used]“. Halliburton, a name anti-fossil lobbies love to hate, recently announced development of a new hydraulic fracturing fluid they call “CleanStim” composed entirely of ingredients used in the food industry. Will this stem criticism? The EPA will have to study this matter, and probably the FDA also. After all, shouldn’t we expect they may have to budget for a legion of new inspectors to guard against salmonella and other food poisoning risks? As Richard Mgrdechian, author of How the Left Was Won observed, “All they need to do is to hear that Halliburton is involved and they will immediately go into attack mode.” If fracing does indeed pose any threat, that danger may fall most directly upon Obama administration’s promotion of energy independence through “renewables”. Access to abundant, inexpensive fuels that contrast so starkly with uncompetitive wind and solar prospects presents good reasons for many to be alarmed. Included are “green energy” subsidy seekers and anti-fossil climate crusaders. But no sympathy for legions of government regulatory bureaucrats is warranted. Fracing won’t endanger them in the least — not as long as current policies prevail. Read Larry Bell’s weekly blog on Forbes at http://blogs.forbes.com/larrybell/
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