Transcript Rising Inequality in an Era of Austerity: The Case of the USA

What is Fracking?
By Amanda Weinstein
Swank Program in Rural-Urban Policy
http://aede.osu.edu/programs/swank
[email protected]
Ohio Fracking 101: Technology, Regulation, and Leasing
December 7, 2012
Sharonville, OH
Outline
 Introduction
 Shale Resources
 Hydraulic Fracturing
 Local Impact
 Economic Impact
 Environmental Impact
 Conclusions
Introduction
 Innovations in extracting oil and natural gas trapped
below the surface in shale have led to oil and gas booms
across the country and more recently to Ohio
 Innovations include microseismic technology, horizontal
drilling, and hydraulic fracturing
 It has also brought concerns about the various impacts of
the boom on the local community
Shale Oil and Gas
 Shale is a sedimentary rock generally high in organic
content specifically oil and gas
 “Conventional” oil and gas reserves occur when some of
the oil and gas has migrated upwards, to layers of
sandstone and porous limestone where it becomes
trapped.
 In some cases, a significant quantity of oil and gas remain
in the shale rock. These reserves are called
“unconventional”
 Hydraulic fracturing is the process by which oil and gas is
extracted from unconventional reserves.
Unconventional Oil and Gas
Shale Gas Production
Actual and Projected Production (EIA)
Ohio Marcellus and Utica Shale
Horizontal Marcellus Shale Wells
Horizontal Utica Shale Wells
Hydraulic Fracturing
 Commercial hydraulic fracturing began in 1949, though it took
several decades for it to become cost effective
 Practical application of horizontal drilling to oil production began
in the early 1980s in the Barnett Shale in Texas
 By 2005 the Barnett Shale was
producing approximately 0.5 tcf of
natural gas per year
 1-2 months to prepare the site
 About 1 month of rig work (casing,
cementing, etc.)
Drilling tower in LycomingCounty, PA
Hydraulic Fracturing: Drilling
 An initial wellbore is drilled and thick
steel pipe is placed in the hole and
sealed with cement on the outside of
the pipe.
 Drilling recommences to the deeper
zones of interest and when this depth
is reached, a second string of steel
pipe is run inside the first and
additional cement is used to provide a
permanent seal.
Approximate Drilling Depths
Hydraulic Fracturing: Land Use
 Spacing is variable
 Marcellus wells can be spaced in 40-acre units or 16 wells per
square mile. An average town could contain up to 1,500 wells.
Hydraulic Fracturing: Fracking
 Once the well is drilled, it takes 2-5 days for the fracturing
process
 “Fracking” involves injecting between 1-8 million gallons of
water, sand, and chemicals down the well.
 Chemicals can vary by well. They are often described as soap and oil by the
industry. Chlorine is often used as an antibacterial agent.
 The pressurized mixture causes the shale to crack or fracture.
 The fissures are held open by the sand to allow gas to flow up the
well
Hydraulic Fracturing
Hydraulic Fracturing: Wastewater
 About ½ the water will stay in the ground
 The rest will come back up as “flowback” or “produced
water” or wastewater (containing fracking chemicals as
well as other minerals occurring naturally below the
surface)
 In some cases the water can be reused for fracturing
 The wastewater will often be stored in a lined pit onsite
until it can be transported to an injection well or
containment vessel
Map of Injection Wells
Hydraulic Fracturing: Gas Production
 Wells are then shut in, or capped, while awaiting completion of
pipelines to transport the natural gas to market
 Gathering lines feed gas to compressor stations and metering sites
which are connected to larger pipelines
 Estimated that a well can continue to produce for up to 30 years
 Highest flow rates of natural gas in the first weeks declines over
time
Environmental Impact: The Negative
 Concerns have been raised over the potential for hydraulic
fracturing to cause water contamination (wastewater or methane)
 Duke University study found elevated levels of methane in water
near drilling sites (Osborn et al., 2011)
 In December 2011, the EPA found hydraulic fracturing fluids were
responsible for drinking water contamination in Wyoming
 Casing failures and spills
 Importance of baseline testing
 Earthquakes from drilling and
injection wells –Youngstown,
OH Dec. 2011
Environmental Impact: The Positive
 A bridge to more environmentally friendly energy production
 Carbon benefits may be slightly less due to the trucking
requirements, but carbon emissions remain significantly less than
coal
Impact on the Local Community
 Noise associated with construction, drilling, and compressor stations
 Trucking – If one well requires 2 million gallons of water for one
fracking, that’s 366 tanker trucks hauling fresh water and 183 tanker
trucks hauling wastewater, for a total of 549 tanker truck trips
 Increases road use increases traffic (and traffic accidents) and road
deterioration
 Large shale booms like Williston, ND also have population booms
putting a strain on housing, utilities, local schools, and other public
services
 Stresses the importance of agreements with the industry on road
maintenance and ensuring severence taxes are appropriate to account
for all of these costs
Severance Taxes
Effective Natural Gas Tax Burden
Economic Impact
 Commenting on shale energy development, Aubrey McClendon
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CEO of Chesapeake Energy of Oklahoma was quoted in the
Columbus Dispatch saying, “This will be the biggest thing in
the state of Ohio since the plow.”
Industry funded estimates range from 65,000 to 200,000 jobs
created by shale development in Ohio
We are concerned that job numbers may be overinflated by an
industry (any industry).
Examining the trends in employment data we find the jobs impact
of shale development will be approximately 20,000 after
accounting for the multiplier effect.
Expect modest employment effects (capital intensive,
displacement, and small share) but more significant income effects
Energy Price Comparison
 Lower prices mean lower energy costs for consumers
Conclusions
 Shale natural gas is associated with significant income effects
but modest employment effects
 However, the real question of shale investment is not job
creation, but net benefits vs. costs (including environmental
costs)
 In this question, natural gas should be compared to coal, the true
alternative.
 Shale natural gas is lower cost, less carbon, and like coal has local
pollution impacts. Shale natural gas will also reduce natural gas
imports
 Ohio should consider higher severance tax to counteract some
of these costs and pay for long-term benefits
 Schools, infrastructure, environment
 Invest in assets to account for the lost extracted assets
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Thank You
Amanda Weinstein
Research Associate for the Swank Program in Rural-Urban Policy
Dept. Agricultural, Environmental & Development Economics
The Ohio State University
([email protected])
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Extra Slides
Major Holders of Utica Shale Right in Ohio (April 2012)
 Major Holders of Utica Shale Right in Ohio (April 2012)
Prices - Booms and Busts
Perspective on Environmental Impact
 Coal ash spill –
 In 2008, the New York Times reported that experts called the
Tennessee ash flood that dumped over 1.1 billion gallons of coal
ash waste “one of the largest environmental disasters of its kind”
 2011 Coal ash spill in Lake Michigan