Hydraulic Fracturing: A Thirsty Endeavor
By Michael Schweibinz
A recent Ceres report analyzes the connection between water-stressed regions and hydraulic fracturing (or “fracking”). The results are rather alarming, considering that nearly half of the more than “25,000 oil and gas wells mapped by Ceres are in water basins with either high or extremely high water stress.”
This finding should be top of mind for natural gas companies, policymakers, and investors. After all, shale gas development cannot continue to flourish without water—massive quantities of water. The question then: Is water management getting the attention it deserves from regulators and the industry? As an investor, the answer to this question may be a crucial factor in investment decisions.
The Inevitable Effects of Supply and Demand
With fracking production levels expected to rapidly increase in the years to come, local water demands should be a mounting concern for all stakeholders. The competition and conflict over water supply is almost certainly going to intensify. In order to meet future water demands and mitigate negative impacts, the industry must better recognize, quantify, and manage water use. According to Ceres, the time has come for an across the board “disclosure of the sources of water used for fracking, the amount withdrawn from each source, and the amount of flowback water (initial flows) and produced water (later flows) returned to the surface.”
Efforts to replace fresh water with alternates like wastewater, saline water, seawater, and acid-mine drainage in fracking operations are somewhat encouraging. In certain states, some lawmakers are even pushing for legislation that would mandate comprehensive water recycling requirements. But as promising as these steps are, recycled water can only go so far in reducing the negative effects that accompany the extraction process.
Will investors watch their assets dry up as our precious fresh water resources disappear down fracked natural gas well? What does that mean to the farmers who grow our food? Investors, policymakers, and industry managers will be the determinants in the final outcome; and investors have an important voice in the debate.
Posted: September 23, 2013