Posted on 08/20/2009 9:50:03 AM PDT by Osage Orange
Should Oil and Gas Investors Fear the FRAC Act?
By Toby Shute
August 19, 2009
In June, Democrats introduced the FRAC (Fracturing Responsibility and Awareness of Chemicals) Act via companion bills in the House and Senate. The FRAC Act seeks to amend the Safe Drinking Water Act so that hydraulic fracturing would be regulated on a federal level.
Hydraulic fracturing is the technique that, combined with horizontal drilling, has allowed domestic E&Ps like Devon Energy (NYSE: DVN), Southwestern Energy (NYSE: SWN), and XTO Energy (NYSE: XTO) to unlock massive shale deposits like the Barnett and the Fayetteville.
Big Oil's lobbyist, the API, has been hootin' and hollerin' about the implications of federal frac fluid oversight, saying that domestic production would drop "significantly" if servicers like Halliburton (NYSE: HAL) and Baker Hughes (NYSE: BHI) had to report the chemical components added to the water that's pumped downhole and used to fracture hydrocarbon-bearing rock. One industry estimate puts the additional cost of compliance at $100,000 for each new natural gas well.
Big Oil (and especially Small Oil), you know I often stick up for you, but I suspect you're crying wolf this time.
The oil patch is an extraordinarily entrepreneurial place. If certain chemicals are banned from frac fluid, I have every confidence that the contractors will be able to formulate an alternative that doesn't break the economics of the stimulation job. Further, that compliance estimate sounds like a serious exaggeration.
Why am I sympathetic to this legislation? For one, state regulatory bodies can become quite cozy with industries that drive the local economy. Second, while the risk of polluting an aquifer seems remote, given that most horizontal drilling occurs much deeper in the earth, I do recognize that there are some rather nasty chemicals involved here, and they have been and will continue to be spilled on the surface. That poses enough of a threat to drinking water to get me concerned.
According to local media reports, a recent frac job performed by Schlumberger (NYSE: SLB) for Chesapeake Energy (NYSE: CHK) in the Haynesville shale play saw some frac fluid spilled, and 17 cows died.
To be clear, the outright ban of hydrofracking would strike an incredibly damaging blow to the industry and to our domestic energy supply (hello, Russian gas imports!), but I don't foresee such a threat to the overall practice. No matter what your opinion of members of Congress, I don't think any of them are that stupid.
As far as better chemical disclosure goes, I'm all for it. Let's just make sure that our representatives realize what a good thing we have going with shale gas, and that they don't strangle the goose that's laying golden energy eggs.
So, they are “concerned” about the chemicals used so far underground that they cannot affect water reserves even though they are drilling for oil that would affect water reserves.
Liberals never make sense.
“No matter what your opinion of members of Congress, I don’t think any of them are that stupid.”
Dead giveaway that the author doesn’t have a clue.
Henry Waxman and his ilk are behind this. Old Nostrilitis himself could care less if we all live in caves and herd goats. I’ve never heard of any evidence of hydrofracing polluting an aquifer. If it happens, the state involved can deal with it by statute or regulation. In no event should the Federales be involved.
We had an issue locally because frac fluids were trucked to a sewage treatment plant. Not all of the stuff remains underground.
The fresh water zones are shallow as compared to the deeper zones that contain petroleum. When the well is drilled the fresh water zones are protected by metal casings that are run and cemented in place and then pressure tested.
This is all about driving the petroleum industry out of the U.S.
Why get totally out?
Probably a 20 something........
Now I know why he's the called the Motley Fool
perfect logic--let's let the Feds regulate another industry to death. There have been literally 10's of thousands of hydraulically frac'd wells and virtually ZERO have been proven to have contaminated any fresh water acquifer.
Surface accidents--very rare, but they happen. Has NOTHING to do with hydro-frac's. Spill could have easily been any number of chemicals NOT associated with frac's, but still deadly. NOBODY can regulate total safety in a very dangerous job.
You nailed it. This admin and it's psychophants (purposely misspelled) want to devastate our industry.
Abrogating Offshore Fed lease terms, eliminating millions of acres of drillable land (prarie chickens, sage grouse, sand lizards, you name it), eradicating IDC's and TDC's, proposing to shorten Fed lease terms from 10 yrs to 5, raise the royalty fron 1/8 to 3/16ths-----I don't have time to list them all.
My distaste for this admin cannot be described in strong enough terms.
Just remember. Every barrel of oil you don’t get here you buy from overseas.
Every dollar you don’t spend getting your own oil you send out of the country buying oil abroad. You’re putting some other country’s people to work, and paying money into some other country’s treasury.
The people who think this is a good idea are the same people that broke Fannie Mae and the same people who thought the trillion dollar bailout would really get this economy moving.
Totally agree.......
FRegards,
They will do everything possible to eliminate the domestic production of oil and gas. Are they being paid by the Saudi’s? You really must wonder. They could not be doing more to hurt us and ruin the economy if they tried.
Nothing would surprise me.....
What a bunch of bull.
They want scarce resources.
Constitutionally the feds do not have this authority. Oh yea, interstate commerce clause. Damn
Bingo
Although not for Brazil, apparently.
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