Technology Makes Gas Available But Brings New Problems As Well

May 2010 Vol. 237 No. 5

Carol Freedenthal, Contributing Editor

Score another victory for technology! U.S. natural gas supplies have the potential of increasing by 20-40% because of advances in two major oil and gas field technologies. Increased abilities to do horizontal drilling and better ways to open shale gas formations – “fracing” – is resulting in new supplies of this major U.S. fuel.

In addition, supplies are available in new parts of the country, making delivery easier. Natural gas, with roughly 90% of supply coming from domestic sources, is one of the cleanest, most efficient economic fuels and technology has opened new reserves by making shale gas available for commercial use.

At the same time, however, these potential new supplies create issues that could affect that supply. Environmentalists have voiced two concerns. First, the question of water – is there enough in the new areas of possible production; what to do with the water produced from production, and the possibility of groundwater contamination from the drilling and production process.

Second, there are still some environmentalists who don’t want to see additional fossil fuel sources because of their belief that more carbon dioxide released in the atmosphere is leading to global warming. While much has happened recently to discredit this theory, there are some who believe it strongly. Both groups can have an important effect on natural gas production and consumption.

Natural gas has many good attributes – economical, clean-burning, easy to transport and use, and readily available. It is the second-most used fuel in the country with a few exceptions in recent years where coal was slightly ahead. Its main markets are space heating in residential, commercial and other locations, heating in process industries and as a raw material for many chemicals including plastics, fertilizers, fibers and others.

Natural gas consistently represents 22-24% of U.S. fuel consumed and potentially could increase in use considerably as a replacement for coal in power generation and, if an infrastructure for easier use could be found, as a motor fuel, especially for fleets and large trucks. To some extent it has not grown more because, until recently, supply security was a question.

To help in this area, several liquefied natural gas-receiving terminals were built and more are in the design-and-construction phase. No question that the additional supply available from shale gas deposits will play a big part in opening new gas markets and curtailing imports.

The importance is already seen from gas coming from the recently developed and growing Barnett Shale play centered in the Fort Worth-Dallas area. According to the Energy Information Administration (EIA) 2009 report on shale gas, Barnett supplies 6% of all gas produced in the lower 48 states.

Other major shale formations and approximate locations are the Marcellus in the Northeast stretching across New York, Pennsylvania, Ohio, West Virginia and dropping down as low as parts of Tennessee, Virginia and Kentucky with 2008 estimated reserves of 262 Tcf; Haynesville in Texas and Louisiana with estimated 251 Tcf; Barnett in Texas with 97 Tcf; SW Wyoming with 53 Tcf; and Fayetteville in Arkansas with 42 Tcf. Marcellus being in the Northeast and near major gas markets is a plus. At the same time, since it is in the high population density area of the country, production in these locations have some additional liabilities.

Shale is fine-grained, sedimentary rock that forms in parallel layers and contains relatively small amount of carbonaceous material. Methane gas or “natural gas” is entrapped in the layers. The improvement in drilling and the development of horizontal drilling makes it possible to commercially extract natural gas from the shale deposits. Since the gas is such formations is so tightly bound, advanced hydraulic fracturing (fracing) technologies have made it possible to recover the gas economically.

Both vertical and horizontal wells are used for shale gas recovery, but the trend is more to horizontal wells to improve well economics and efficiencies. One horizontal well offers much more exposure to the formation than a vertical well even though the horizontal wells are more difficult and expensive. The number of wells to access the same reservoir volume can be reduced 30-50% using horizontal vs. vertical wells.

In addition to the cost saving, it greatly reduces the environmental exposure when the number of wells is reduced even though the individual well may be slightly more expensive. Using multi-well pads with the horizontal drilling greatly reduces the amount of road, pipeline path production facilities and environmental disturbances.

Once the well is drilled, casing and cement installed, the second advanced technology comes into play. Hydraulic fracing is crucial to the gas recovery. A fracturing fluid is pumped into the well under high pressure to open the rock formation around the well, giving the area more porosity and allowing easier flow of the gas.

The openings made from this process allow the gas to flow in economic quantities from the well. Groundwater supplies are protected from the fracing fluids by the casing and cement used in the well and, the distance of the well from supposedly groundwater supply locations.

The fracing procedure is a highly specialized, custom operation where many proprietary methods and formulations are used. The fracing fluids are mostly water and sand with about 2% of chemicals to improve the fracing and gas flow. Each company has its own special formulation for each specific job and this in itself creates another problem.

According to the EIA report, each horizontal shale gas well needs roughly 2-4 million gallons of water. A relatively small amount compared to water used for power plants, agriculture, etc. Still, in some of the areas where shale gas is found, these water demands could pose a problem. Much of this is addressed in the already in place permitting program.

Another problem is what to do with the water returned from the fracing and the natural formation water. Regardless of which source, the water must be managed and is usually treated and discharged, injected into underground wells, or recycled for further use. Though there are countless regulations regarding wastewater disposal, this is a major concern of many environmentalists.

Most of these areas of environmental concern are manageable and covered by regulation. In 2004, the Environmental Protection Agency (EPA) studied the process and evaluated its safety and procedures. The report stated that drilling and production were safe and allowed the operations to continue without coming under the Safe Water Drinking Act.

Some questioned the validity of the EPA report and decision. The EPA recently was given the responsibility to re-evaluate the operations and set more definite guidelines and rules. In March, the EPA announced a new study was starting on the impact of shale gas recovery on water quality and public health.

Initiated in Congress, the DeGette (NY)–Hinchey (CO) bill would force industry to disclose the chemicals it uses and require regulation under the Safe Drinking Water Act. Because drilling fluids compositions are trade secrets, this disclosure is opposed by industry. The main concerns of environmentalists and regulators are solvents and biocides used in the fracing fluids.

Industry is working with the federal government to develop sufficient information to assure the public of the safety of shale gas development. New York and Pennsylvania are also looking at the safety and will review their drilling permit procedures. There have been instances in these states and a few others where there is evidence of groundwater intrusion. The big operators in the fracing business, Halliburton and Schlumberger, have their own safety programs and are looking at alternative methods to ensure safety, efficiency and productivity.

Shale gas development can be an important part of an overall national energy agenda. Along with it are the potential of coal seam and tight sands gas production. Natural gas is a fuel that that should capture more of the U.S. fuel market and with a little development, might even take over more of the transportation market.

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