Peer Review Comments
Alan Krupnick
Director, Center for Energy Economics and Policy
Resources for the Future
Washington, DC
Berlin, March 6, 2012
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.
Gas price for given rate of return
Production rate
Conventional gas
plays
U.S shale
gas plays
Costs versus production
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)
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%!
German Risk Study
• Stakeholder input and review
• Technical Study
• Recommendations
Expert Survey: Is there a sweet spot of consensus?
Technical Issues
• Need overarching framework: What‘s in,
what‘s out (risk matrices for impact pathways)
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
• 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
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
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
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
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?
Problems and poor cementing are common and lead to gas migration and sustained casing pressure
From Schlumberger, Oilfield review
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
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``)
Casing and Cementing Depth
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