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Natural Gas Drilling Method Poses Environmental Risks
By Christie Renner

Oil and gas are fossil fuels—non-renewable resources made more than 300 million years ago. Since their supply is limited to what’s already in the ground, they will run out. As the global stock of fossil fuels diminishes, reaching the remaining reserves becomes more difficult. As we’ve seen with the BP oil spill, drilling—whether for oil or gas—is getting deeper and riskier.

Just as deepwater drilling for oil has been on the rise as a percentage of total oil production, drilling for natural gas is also becoming a more intensive industrial process. To get to natural gas reserves deep in the earth’s crust, companies use a process called hydraulic fracturing, or hydrofracking, a process whereby bedrock is cracked to release natural gas bubbles that can be captured and sold.

Investors are becoming increasingly concerned about the chemical fluids used in the fracturing process—mixes of water, particles, and chemicals that are injected into fissures thousand of feet below ground. What happens to these chemicals after the fracturing is done? Are they turning up in drinking water? A single well may use more than 40,000 gallons of fracturing chemicals mixed with every million gallons of water. Many wells in the Marcellus Shale in Pennsylvania and New York use several million gallons of water apiece.

The potential fracturing chemicals have to contaminate entire watersheds and aquifers could have devastating impacts on community health, farming operations, and investor returns. Good business practices often depend on effective regulation. And effective regulation must rely on sound scientific research. However, it’s difficult for scientists to study the potential hazards of toxic chemicals when chemical names and concentrations are kept secret. Thus, corporate disclosure is a critical first step.

The Environmental Protection Agency (EPA) embarked this year on a congressionally mandated study of the risks hydraulic fracturing presents to drinking water. But a study of this magnitude takes many years. While it’s better late than never, in the meantime, the industry is largely free to continue along with a business-as-usual mindset.

Green investors are demanding more—greater disclosure, better research, less toxic chemicals, and effective regulation. Communities have a right to know the life-cycle impacts of the chemicals companies are using in their watersheds, and shareholders have a right to know the risks to their portfolios. Some companies are stepping up, with Range Resources announcing in July that it will voluntarily disclose the chemical additives it uses in the Marcellus Shale.

According to the Energy Information Administration’s Annual Energy Outlook 2009, Natural gas extracted from shale by hydrofracking is estimated to contribute over 20% of the U.S. gas supply by 2020. While natural gas burns cleaner than coal or oil, it still releases methane, a greenhouse gas, and it is still a non-renewable resource. No matter how many improvements can be made in the safely of hydraulic fracturing, a transition to renewable energy remains critical to our economic future.

NOTE: Mention of specific companies or securities should not be considered a recommendation to either buy or sell that security.  For information regarding the suitability of any security for your investment portfolio please contact your financial advisor.

Posted: August 20, 2010