The costs of once unfathomable drilling practices
Horizontal drilling and hydraulic fracturing or “fracking” in the United States has created extraordinary economic opportunity in the nation’s energy sector while at the same time has posed unprecedented environmental concern. The boom in US production has shown that US energy independence is not as fictitious as it once would have been thought to be. The costs of once unfathomable drilling practices have fallen while the domestic demand for energy commodities and hydro-carbon-based products has steadily risen to support strong enough price levels to incent production of these hard-to-reach resources.
The impact is impressive. Earlier in 2014, the FracTracker Alliance compiled a set of state-by-state figures on active wells showing that the US has solidly surpassed the one million active oil and gas wells, including fracked and conventionally drilled wells. According to the Energy Information Administration, the explosive increase in US production has driven down the US’s share of energy imports from a high of 30% of total energy consumption in 2005 to 16% by the end of 2012. Currently, their Annual Energy Outlook projects US production to sustain over 95% of domestic energy consumption within the next twenty years. Economically, all of this activity has translated into GDP growth. As of 2012, the Oil and Gas industry contributed over $400B to US GDP as measured by the US Bureau of Economic Analysis’s Gross Output industry data, representing an over 100% increase in the industry’s share of total US GDP from ten years prior in 2002.
Unease about all this activity’s impact on the environment is well-founded however. Waste and water issues aside, the abundance of natural gas supplies in the regions where hydraulic fracturing is taking place has outpaced the development of the necessary infrastructure required to get the vast volumes of current production to market. The lack of available pipeline and natural gas storage capacity has led gas producers to literally waste excess supplies through venting and flaring of the “stranded” gas. Let alone wasteful, these practices are harmful to the environment as they release large volumes of emissions into the atmosphere. Venting releases the natural gas itself – methane – directly into the environment, while flaring, combustion of the natural gas at the well-head, releases carbon dioxide. Carbon dioxide is a less harmful greenhouse gas than methane which has led flaring to become the preferred method for dealing with excess gas. In North Dakota, the problem of flaring has been most significant. There, as natural gas production has more than tripled over the period from 2005 to the beginning of 2012, the amount of stranded, “un-marketed” gas increased to over 35% of total production for the same period. And yet significant regulations on these practices at the State- or Federal-level have yet to be imposed.
