Can Fracking Be Done Safely?
Danny is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Unless you have been living in a cave, you have probably heard a great deal about hydraulic fracturing or “fracking”. This is the process of creating fractures in rocks and rock formations by injecting a mixture of water, chemicals and sand (known as slurry) into cracks to force them open. The larger fissures allow more oil and gas to flow out of the formation and into the well, where it can be extracted.
Fracking has been occurring since the late 1940’s, but has recently come to the forefront as a cost effective method for extracting natural gas from shale deposits. The shale that traps natural gas is the most abundant form of sedimentary rock on earth. Consequently, shale natural gas may be the least expensive and abundant energy source currently available. However, there have been questions regarding the environmental consequences related to fracking, causing it to come equally to the forefront of the public consciousness.
This process has set off a political and environmental firestorm. Supporters of the process and critics are equally vocal. Supporters of fracking point to the abundance of natural gas in the U.S., that natural gas is significantly less expensive to produce than an equivalent amount of petroleum based fuel, and that natural gas is a cleaner burning fuel. Critics point to the possibility of ground water contamination, earthquakes, the exacerbation of the greenhouse effect caused by escaping methane, and the energy intensive drilling and transportation of natural gas. Politicians are, of course, staking claims on both sides of the argument.
So who’s right and why should I even care?
The truth is that both sides are right to a certain extent and the issue is not as much black and white, as it is a thousand shades of gray. Fact and fiction have mixed in the public eye and myths abound. The issue is not merely whether or not we should ban or permit fracking, but are we as a society educating ourselves on the issue and are there things we can do to make fracking safe and environmentally responsible?
A booming industry is growing up around the availability of this abundant and inexpensive natural gas. This boom is also affecting a wide variety of players, some in the industry, some not. Consider just some of these players. Westport Innovations (NASDAQ: WPRT) develops and markets technology for engines to operate using natural gas. They have partnered with companies like Cummins (NYSE: CMI) to build 15 liter natural gas engines for medium-duty vehicles like buses and delivery trucks. Meanwhile, Cummins recently announced that they are developing their own engine outside of their agreement with Westport. Westport announced a partnership with Caterpillar (NYSE: CAT) to develop natural gas technology for off-road equipment. Clean Energy Fuels (NASDAQ: CLNE) is the leading provider of alternative fuel, while they also design, build, operate, and supply fueling stations for these natural gas vehicles. They have partnered with Flying J to place natural gas fueling stations where major fleets operate. Recently oil giant Royal Dutch Shell has announced a plan to invest more the $300 million in a series of filling stations located at Travel Centers of America, the country’s biggest chain of truck stops. Frito-Lay (a unit of PepsiCo) (NYSE: PEP), a company that depends on long-haul trucks as part and parcel of their business, plans to replace nearly all of its fleet with vehicles that operate on natural gas.
An entire industry and many others have a great deal invested in this natural gas boom. With all this at stake, can this industry and the major players operate in a way that mitigates the environmental impact without a financial burden so severe as to force the industry to abandon this valuable natural resource?
A recent report by the International Energy Agency provides the answer. The report reveals that shale gas can be extracted safely, and at relatively low cost, but this will require additional regulation to ensure environmentally sound practices. The report identifies measures that can be taken to achieve a near-zero-impact environmental footprint and that this would add approximately $600,000 or 7% to the approximate $8 million cost of a typical well. Given the low cost as a percentage of the total and the relative benefits to the environment, I suspect the politicians, energy companies and environmentalists can make concessions and find a mutually beneficial solution. In that one possible future, fracking will become more a viable and accepted technology and less of a political football. As a country, we should demand from our politicians, not rhetoric, but action to ensure not only the advancement of this industry but the protection of our environment. It does not have to be one or the other. We can all win.
Danny Vena owns shares of Westport Innovations. The Motley Fool owns shares of PepsiCo and Westport Innovations. Motley Fool newsletter services recommend Clean Energy Fuels, Cummins, PepsiCo, and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
