But Does it Stop Earthquakes?
Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The rise of hydrolic fracturing ("fracking") for natural gas has been viewed alternatively as a blessing and a curse for the nation. A blessing since it produces a cheap, relatively clean fossil fuel. It represents domestic energy that carries the benefits of domestic jobs and energy security, especially at a time when many countries we import oil from really don't like us. Balance of trade improves, tax revenues increase, and for those who own the land where the gas is located, they can literally become overnight millionaires. The curse of fracking is largely environmental. In particular, fracking fluid is toxic, can contaminate groundwater or can create toxic spills at the drilling site. Given that there is an estimated $1 Trillion in recoverable natural gas in the Marcellus Shale formation alone, are some environmental concerns going to stop natural gas drilling, especially in this economy? Does a chicken have lips?
Fortunately, the environmental concerns have intersected with potential economic gain to produce, believe it or not, an environmentally safe fracking fluid. In fact, both Haliburton (NYSE: HAL) and Baker Hughes (NYSE: BHI) have developed what they claim are environmentally safe fracking fluids. Don't believe it? Well, a Haliburton executive went so far as to publicly drink his company's fracking fluid to demonstrate its safety. He must have lived because the governor of Colorado subsequently took a swallow of the stuff later that year (it's still too early to tell if either of them grew an extra set of fingers or something - maybe that's why there's no record of a Baker Hughes executive drinking his company's fracking fluid).
Environmental concerns have created opportunities for small companies litke Verenium (NASDAQ: VRNM). This small biotech firm has entered the fracking game with an enzyme product to degrade gaur, a foam that is used in the initial fracking process. Today, hydrochloric acid is used to dispose of gaur, but VRNM believes its Pyrolase product is safer, less toxic and cost effective.
So what does this mean for the US gas industry? If the claim bears out, it's a PR victory for those who use the safe fluid. Bloomberg reports there is still controversy and suspicion surrounding the reporting of fracking at drill sites. If one company freely discloses that it's fracking and using safe fluid, it would have a PR advantage over a competitor that isn't disclosing their fracking activities. This can only benefit fluid suppliers like HAL and BHI. Can you imagine what impact a government decree ordering only safe fluids for fracking would have on HAL or BHI? For natural gas drillers like Cabot Oil and Gas (NYSE: COG) or Concho Resources (NYSE: CXO), they can continue to develop their gas fields with one less problem to deal with. As natural gas production increases, more business comes to gas pipelines and storage facilities. The whole industry would grow and create jobs, tax revenue and profits without the stigma of "dangerous" fracking fluids.
To be sure, there are other problems natural gas producers must face. Ironically, their success in producing natural gas has led to a decline in price and profits. There is still the problem of handling waste water generated by the fracking process. An acute problem in the Midwest is the availability of water during a severe drought. There is ongoing debate regarding the contamination of drinking water by natural gas. And earthquakes in Ohio are being blamed by some on fracking although fluid injection waste wells may also have played a role.
According to the US Energy Information Administration, natural gas use in the United States has steadily increased while use of total crude oil and petroleum products declined. The USEIA projects a 49% increase in natural gas production from shale based reserves. This combination of domestic natural gas reserves and safe fracking fluid portends an expanding and profitable natural gas industry.
dylan588 has a position in COG. The Motley Fool owns shares of Halliburton Company. Motley Fool newsletter services recommend Halliburton Company. 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.
