The North American oil and gas industry is facing growing pressure to reduce the environmental impact of shale gas development before a public backlash limits its production.
Several state and provincial governments have already responded to environmental concerns by imposing de facto moratoriums on shale gas drilling. Critics contend the intensive drilling and hydraulic fracturing – shooting chemically treated water underground under high pressure to crack open gas-bearing shale – threatens local water sources.
But even in states and provinces where the industry is still drilling and producing, there is mounting pressure for companies to improve their environmental performance, and for federal and state governments to impose costly regulations.
In a report on shale gas development released Thursday, a high-profile panel appointed by the U.S. Secretary of Energy recommended a series of changes that would add significantly to the industry’s production costs.
Calgary-based companies such as Talisman Energy Inc. and Encana Corp. are major producers of shale gas in the United States and Canada, while industry giants such as Exxon Mobil Corp. and Royal Dutch Shell PLC have invested heavily in expanding their shale-gas reserves.
From producing almost nothing in 2005, the unconventional gas sector could supply 45 per cent of U.S. consumption within 25 years, and help crowd out virtually all American imports of natural gas, according to the panel’s report.
The shale revolution has created a glut of North American gas, driving down prices and forcing Canadian producers to back proposals for new pipelines to the B.C. coast, where the natural gas would be liquefied and exported it to Asian markets.
The committee was chaired by John Deutch, a former director of the Central Intelligence Agency and now a professor at the Massachusetts Institute of Technology, and included Daniel Yergin, the highly regarded chairman of IHS Cambridge Energy Association and Fred Krupp, president of the Environmental Defence Fund.
It said there are legitimate concerns about the effects of the industry on water and air quality and on communities, as well as the cumulative impacts on ecosystems. It warned that these concerns will continue to fuel public opposition.
“There are serious environmental impacts underlying these concerns and these adverse environmental impacts need to be prevented, reduced and, where possible, eliminated as soon as possible,” the panel concluded.
“Absent effective control, public opposition will grow, thus putting continued production at risk.”
The Deutch panel said there is only a “remote” risk that fluids used in hydraulic fracturing would leak into underground aquifers that supply drinking water. But it urged a series of measures to reduce the risk, including tougher regulations and monitoring of well design.
The panel also recommended governments adopt a “manifest” system that would require companies to track the waste produced by their wells. One major concern among industry critics is the volume of chemically-laced wastewater produced, and the practice of some contractors of illegally dumping it into local streams.
Talisman says it has a policy of re-using as much wastewater as possible at its Marcellus Shale operations in booming Pennsylvania while, in other states, companies are required to re-inject wastewater into old, unused wells.
Despite calls for new regulations, industry associations largely endorsed the panel’s report.
“Taken together, these fact-based recommendations represent yet another key step toward ensuring that common-sense policies must be in place to ensure that American natural gas development continues to be balanced with the proper environmental safeguards,” said Kathryn Klaber, president of the Marcellus Shale Coalition, which represents companies operating in the Marcellus field.