Fracking Companies Gain Ground

Brian Hicks

Written By Brian Hicks

Posted September 30, 2013

Fracking is the process of injecting millions of gallons of water, sand, and chemicals deep into the ground to crack the shale rock below to free up oil and natural gas. It has expanded across the U.S. in the last five years to revive the U.S. oil industry.

Along the way, it has picked up its fair share of controversy from environmentalists, who claim the process ruins drinking water and can cause natural disasters.

super frackBut a lot of these arguments just don’t hold water today. It is undeniable how much fracking can turn any economy around – just look at North Dakota. The state’s unemployment rate stands at half the national average, and it rakes in millions of dollars in state revenue each year thanks to an influx of jobs from the Bakken shale formation.

Now other states want a piece of the action. Both red states and blue states are starting to jump on board with the idea that “fracking” is not a bad word. It would be one thing if a lot of problems were coming of it, but in reality they’re not. And who in their right mind would pass on billions of dollars in tax revenues brought in by gas and oil?

There are some states that remain reluctant to the changes. New York has instituted a moratorium on fracking for the time being, and Illinois just set strict regulations in June.

But overwhelmingly, fracking is sweeping the nation, and state governments are seeing the light.

To the West

One state pretty much sums up what I’m talking about: California.

Just two weeks ago, the most Democratic and largest state in the nation and its Governor Jerry Brown signed into law new regulations on fracking that will allow companies to explore areas in and around the San Joaquin Valley.

That means we will finally see the full potential of California’s Monterey shale deposit unlocked, where there is an estimated 15.4 billion barrels of recoverable oil.

This formation, according to The Washington Post, could bring in close to $25 billion in tax revenue and create 2.8 million jobs by 2020.

The new law will require companies to obtain acidizing permits – allowing them to use hydrofluoric acid and other chemicals to dissolve shale rock – in addition to fracking permits.

Full public disclosure is also required – notifying neighbors, making chemicals used public, monitoring groundwater and air quality, and performing an independent study. This is meant to ensure there is comfort at each level of the process.

Of course, California is a haven for environmentalists, who were outraged by the new law and who say it’s not enough. But this says a lot about the direction fracking is headed.

Even Governor Brown said the law still needed some changes before it went into effect next year. He didn’t specify exactly what those changes might be.

Regardless, the new law would prohibit oil companies from fracking in the state without full disclosure, something they always had the right to before.

This is a major step to the protection of the public and the environment. The law will go into effect January 1, 2014.

To the East

On the opposite side of the country in Pennsylvania, they’re doing things just a little differently. Instead of going in and fracking deep down into the unconventional plays, the smaller, local companies are looking closer to the surface.

The focus here seems to be with horizontal drilling. Drillers are taking old reservoirs, drilling horizontally as shallow as 2,000 feet and more than 5,000 feet across, and fracking there in order to force the fuel to the surface.

We won’t know for sure how well these efforts are paying off until next February, when companies file their production reports for the year. But it gives small companies a shot at being relevant again, as they have been all but squeezed out by bigger companies.

Smaller companies like Horizontal Exploration LLC, formed two years ago, and Pennsylvania-based Mid-East Oil are all drilling these shallow horizontal wells. Horizontal Exploration has drilled three such wells so far and has permits for another eight. This month, it fracked the first of these wells and is awaiting results.

Penneco Oil Company Inc. has been doing the same thing for much longer, and it has seen success with the practice.

General Energy and Catalyst Energy – both Pennsylvania-based – have too secured permits from the Department of Environmental Protection to drill shallow, horizontal wells.

These wells, in time, should cost under $1 million per well compared to the $4 to $10 million it costs to drill into unconventional plays.

And they uses far less water – 120,000 gallons, according to Pittsburg Post-Gazette, compared to 5 million gallons for a larger operation.

The results will never be comparable, but the yield is much higher than with a vertical well, and it has a much quicker payback period – about 18 months compared to four years.

And as these wells are closer to the surface, the possible threat of water contamination is even further removed.

Fracking, whether you’re on one coast or the other, is happening, and it’s happening safely and effectively.

Expect North Carolina to make some headlines of its own. And New York seems to be just biding its time.

You’ll know when we do.


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