Positive U.S. Energy Outlook Hinges on the Fracking Fight

Email

The International Energy Agency (IEA) released their World Energy Outlook report for 2012 today making headlines by forecasting that the United States will become the world's largest oil producer by 2020.

"North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world…" said IEA Executive Director Maria van der Hoeven in today's press release.

"The WEO finds that the extraordinary growth in oil and natural gas output in the United States will mean a sea-change in global energy flows," the press release continued. "…the United States becomes a net exporter of natural gas by 2020 and is almost self-sufficient in energy, in net terms, by 2035. North America emerges as a net oil exporter…"

All of this good news is based upon the continued rapid development of America's shale gas and shale oil resources through the use of fracking.

U.S. Energy Outlook: Fracking a Major Factor

As discussed in detail by Money Morning Global Energy Strategist Dr. Kent Moors, developing the oil and gas trapped in shale is expensive and energy intensive.

It also requires vast amounts of water.

Recovering energy through fracking requires water, sand and chemicals to be injected into shale under high pressure, fracturing the rock to release the gas and oil trapped within it. There are often a couple of miles of bedrock between the hydrocarbon-bearing shale and groundwater.

"Water is essential to the production of energy, and the energy sector already accounts for 15% of the world's total water use," wrote the IEA. "Its needs are set to grow, making water an increasingly important criterion for assessing the viability of energy projects. In some regions, water constraints are already affecting the reliability of existing operations and they will introduce additional costs."

The argument over energy vs. water frames the debate over fracking here in the Catskill region of New York. The Deihl farm, featured in a Los Angeles Times article on how the argument over fracking is dividing families, is about three miles from my own 62-acre spread overlooking the Delaware River valley.

Driving to the local supermarket in nearby Callicoon or to the drugstore in Jeffersonville, there are only a few homes that do not have yard signs expressing either support for or opposition to fracking. Relations between neighbors on opposite sides of the argument have become tense.

Some of the Diehl land is right on Callicoon Creek, home to some of the best trout fishing in the area.

"But the Diehls are divided over the fate of their property – like thousands of others along the Pennsylvania border, where rich natural gas deposits underlie forests, pastures and towns," the LA Times reported. "As New York prepares to lift a moratorium on new permits for hydraulic fracturing – which carries environmental risks – landowners are debating whether to lease mineral rights to extraction companies."

Some towns have passed resolutions either in favor of fracking or banning it outright.

The Wall Street Journal wrote,"…about 100 municipalities have enacted temporary moratoriums on the natural-gas extraction process known as fracking, while about 35 have banned the practice altogether. Meanwhile, nearly 60 towns and villages have passed resolutions in support of fracking or against the idea of a ban. Dozens of other communities are debating the issue now."

The nearby town of Bethel, which hosted the 1969 Woodstock Festival, has banned fracking. But Bethel enjoys a vibrant tourist industry centered on an outdoor concert venue and museum at the site of the 1969 event.

Most of my neighbors, who barely make a living from their small dairy herds, would not turn down a gas company check if it were waved in front of them.

Still, according to CNN, the city of New York, which gets its water from the Catskill region, has banned fracking anywhere within its watershed.

The Real Fracking Issue

The real issue is what to do with contaminated wastewater from the fracking process.

Huffington Post writes, "There are three options for waste disposal …Truck the millions of gallons of wastewater produced per well to a treatment facility and either discharge the treated water into a river or reuse it for another drilling project; ship it out of state for deep-well injection disposal; or recycle it on-site for drilling multiple wells."

Large numbers of heavy trucks plying the steep, narrow mountain roads carrying thousands of gallons of contaminated water will be an issue.

Then there is the human factor, in that accidents and poor drilling practices have contaminated water wells.

There is no easy answer to the issue of fracking. On the one hand, the United States would benefit enormously from the revenue and the energy independence that could come with developing shale hydrocarbons. On the other hand, once groundwater is contaminated, it is rendered useless.

It is one thing for the IEA to forecast that fracking will change the U.S. energy outlook. It is quite another to get the Diehls or any of my other neighbors to agree on what the future of the Catskills should be.

For more from Dr. Kent Moors on U.S. energy news, check out his story today on why oil prices have dipped and where they're headed next.

Related News and Articles:

Join the conversation. Click here to jump to comments…

  1. Daniel Natt | November 13, 2012

    Why don`t they use Gas Frac Energy, GSFVF on the stock exchange. It use propane gel and not water.

    • Greg Dietz | November 30, 2012

      I agree with Mr. Natt's response. Although Gas Frac Energy seems to have hit a bump in the road with its management and leadership, their technology is one of a kind.

      Pro's: no requirement for millions of gallons of water; no water treatment issues, smaller pad footprint and trucking impact; higher well production; shorter completion times; fewer chemical additives needed (no algecides, friction-reducers, surfactants, etc); less proppant required.

      Con's: upfront costs of propane higher than water; higher safety risk to employees; shortage of equipment; limited use in U.S.; small company.

      Imagine if moonshiners could distill alcohol from moonshine PLUS retrieve almost all of the moonshine needed for production and they did not have the issue of dealing with spent mash disposal. Do you think they'd start buying alcohol instead of sugar and corn? Sorry, but I just saw an episode of "Moonshiners" on television so the analogy just seemd timely.

Leave a Reply

Your email address will not be published. Required fields are marked *

Some HTML is OK