U.S. shale exploration just got more interesting

I have dear friend who works for a major electric utility that powers Virginia, part of North Carolina and West Virginia. It also has far flung operations in natural gas, coal and various other fuels for its generation facilities.

Now we usually think of utilities’ employees either working the lines, manning the generation and distribution operations or sitting in an office looking at billing and usage trends.But these firms have a significant amount of resources dedicated to commodities and futures trading as well as meteorological and technology divisions. They need to hedge their fuel production and supply, and they need to know the weather; it’s very big money.

Fortunately, my friend sends me some of the company notes that get sent out to the company to keep those who are interested informed on any news some of these divisions discover. A recent memo forwarded to me was about some very interesting developments in fracking.

 What’s fracking?

Fracking is one of the technologies that has allowed US energy companies to access all the oil and natural gas in massive fields that were previously inaccessible. By “fracturing” the thick shale layers above a field, drillers can now tap into the gas or oil that is in between these shale layers.

But there are two big issues with fracking.

One is that is uses a lot of water. And then the waste water, with the fracking chemicals in it, has to be stored and disposed of in a safe manner. Some operations do this very responsibly and well. Others significantly less so.

Also, given the recent droughts and shrinking potable water supply, water is a very important commodity to a lot of various stakeholders. And sometimes, that contaminated water ends up in drinking water for surrounding farms and towns, killing crops and livestock.

The other issue involves concerns about how safe fracking is in general. One of the key concerns is that in some places fracking can cause earthquakes.

This assertion has been made for years, especially in California, but there was little hard data to prove this one way or the other. Well, one of the links in the memo that was forwarded to me talked about wastewater from fracking operations in Ohio’s Marcellus Shale is linked to all the earthquakes in a town in Ohio that had no known past quakes.

That’s a big deal. Now, big industry will certainly make sure its phalanx of experts are deployed casting doubt on this potential issue. For example, most utilities have huge interests in the natural gas that comes out of the Marcellus Shale (and all the other shale fields), because they not only buy it, they also produce and ship it.

Don’t be surprised if these stories start to grow again now that the Flint water story is out.

If you live in rural communities and there are fracking operations around, you may want to have your water checked by the local plumber to make sure your well water hasn’t suffered.

Fracking 2.0

But the next story in the note was far more encouraging.

Apparently GE and Norway’s Statoil are developing a new technology for fracking using only frozen carbon dioxide (CO2) gas. The CO2 would be chilled at the wellhead to a super critical fluid that is neither solid nor liquid and then propel the sand and other fracking chemicals into the shale.

This could be a game changer and it’s still in the early stages, but it’s something to watch very carefully because even if big energy and big utilities can hold off issues with water use and destruction in fracking areas – or worse, earthquake-generated fracking – it’s costly and slows down the entire process.

Transitioning to a waterless fracking compound that essentially evaporates once used would alleviate all the major concerns raised about fracking.

Keep an eye on GE’s Ecomagination unit that has put significant resources into this, as well as Statoil and a Southwest firm called Ferus. Also, Canadian firms FracMaster and GASFRAC Energy Services are exploring similar work.

Now if these U.S. producers could just solve the energy pricing problem….

— GS Early

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