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Page 1: Peer Review Comments

Peer Review Comments

Alan Krupnick

Director, Center for Energy Economics and Policy

Resources for the Future

Washington, DC

Berlin, March 6, 2012

Page 2: Peer Review Comments

The Opportunity

• The sustainable development of shale gas is a major

issue for the world.

• Local, state and national costs and benefits are

important.

• We need smart and cost-effective regulation. Do we

already have it?

• A dearth of data and research helps keep

controversies alive.

Page 3: Peer Review Comments

Gas price for given rate of return

Production rate

Conventional gas

plays

U.S shale

gas plays

Costs versus production

Page 4: Peer Review Comments

Key Issues for Public Policy

• Resource Base: “Enough gas for 100 years” vs. Two U.S. government agencies: 84 tcf vs. 410 tcfin Marcellus

• Price: Stable and low (too low?) vs. BAU

• Global warming: Strong vs. flimsy bridge to a low carbon future

• Energy Security: “an answer” vs. BAU

• Environmental risk: “Tempest in a teapot” vs. fracking bans (25% of Marcellus in New York)

Page 5: Peer Review Comments

Risks of shale gas development

Aubrey McClendon interview

with Forbes:

F: It’s clear that as long as

wells are cased and

cemented properly, fracking

is safe, right?

M: 100%!

Page 6: Peer Review Comments

German Risk Study

• Stakeholder input and review

• Technical Study

• Recommendations

Page 7: Peer Review Comments

Expert Survey: Is there a sweet spot of consensus?

Page 8: Peer Review Comments

Technical Issues

• Need overarching framework: What‘s in,

what‘s out (risk matrices for impact pathways)

Page 9: Peer Review Comments

Flowback/produced water storage/disposal

Well production and operation

Shutting-in, plugging and abandonment

Workovers

Vertical drilling

Site development and drilling preparation

Horizontal drilling

Fracturing and completion

Upstream and downstream activities

The shale gas development process has been broken

down into nine steps, which will be used to identify

sources of burdens and impacts.

1

2

3

4

5

6

7

8

9

Activity Categories

Page 10: Peer Review Comments

• Drilling equipment operation at surface• Drilling of wellbore underground• Casing• Cementing• On-road vehicle activity• Off-road vehicle activity• Use of surface water and groundwater• Venting of methane • Flaring of methane• Storage of drilling fluids at surface• Use of recycled drilling fluids• Disposal of drilling fluids• Accidental releases from wellbore (e.g.

blowouts)• Disposal of drill solids, cuttings

This drilling technique bores a single well

shaft vertically into the desired formation.

Sources of burdens include:

Vertical drilling

Site development and drilling preparation1

2

Specific Activities for Vertical Drilling

Flowback/produced water storage/disposal

Well production and operation

Shutting-in, plugging and abandonment

Workovers

Horizontal drilling

Fracturing and completion

Upstream and downstream activities

3

4

5

6

7

8

9

Page 11: Peer Review Comments

The activities create burdens, such as air pollutants, drilling fluids, and noise,

which have impacts that people care about.

Air pollutants

Drilling fluids & cuttings

Saline water intrusion

Habitat & community disruptions

Produced water constituents

Fracturing fluids

?

Other

11

Condenser & dehydration additives

Flowback constituents

Page 12: Peer Review Comments

Human health impactsMorbidityMortality

Market impactsAgriculture

TourismWater-using industries

Other

Ecosystem impactsBiodiversity loss

Endangered speciesOther species population change

Climate change impacts

Quality of life impactsRecreationAestheticsTime loss

Other

Groundwater

Surface water

Soil quality

Air quality

Habitat disruption

Community disruption

Occupational hazard

Intermediate impacts are to the air,

water, soil, etc. in which the burdens

first reside.

Final impacts are the ultimate damage to

the environment, human health, etc.

These burdens have intermediate and

final impacts

Page 13: Peer Review Comments

Example of Impact Pathways

On-road

vehicle activity

Air quality

Community

disruption

Conventional air

pollutants and

CO2

Noise pollution

Road congestion

Morbidity

Climate change

impacts

Aesthetics

Time loss

Activities BurdensIntermediate

Impacts Final Impacts

Page 14: Peer Review Comments

Technical Issues (2)

• Lack of data – extrapolation and modeling vs. Statistical analysis of data

• What additional risks are posed by fracking?– Hydraulic fracturing, horizontal drilling vs. All elements

that are different than conventional drilling vs. Something in between

• Gaps– Conventional air pollution and health

– At scale: Community impacts (road damage, propertyvalues, visual pollution, congestion)

– Entire water cycle?

Page 15: Peer Review Comments

Problems and poor cementing are common and lead to gas migration and sustained casing pressure

From Schlumberger, Oilfield review

Page 16: Peer Review Comments
Page 17: Peer Review Comments

Stream waterWater tanker trucks Surface storage at

gas-well site

“flowback”

water

Flowback treatment

brineDeep-well

Injection

Frac-Water: From Cradle to Grave

Add:

sand, biocides,

scale inhibitors,

acids, surfactants

Page 18: Peer Review Comments

Technical Issues (3)

• Methods

– Worst case vs other moments of risk distribution

– Heterogeneity of geology, hydrology, company

behavior; baseline regulations (care about residual

risks, not ``engineering risks``)

Page 19: Peer Review Comments

Casing and Cementing Depth

Page 20: Peer Review Comments

For the study: To what end?

• Policy locus: who has/should have authority?

• Policy design:

– Optimal fracking mixtures

– Performance-based vs. Command and control

– Big issues: Who owns the mineral rights; whocontrols company payments and how are theyassessed?

• Comparison with other forms of energy


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