(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON, Feb 6 (Reuters) - Fracturing oil and gas from tight rock formations promises secure energy supplies for generations, but only if industry and regulators can convince voters it can be done safely without poisoning water supplies or adding to global warming.
Like other forms of petroleum production, and innovative technologies such as liquefied natural gas and nuclear, shale gas and oil need a political “licence to operate”. The still-born nuclear industry shows what happens when industry and regulators fail to win the public argument over safety and environmental impacts.
Hydraulic fracturing has already unleashed a storm of protest threatening the technology’s viability. Critics point to the enormous amount of water used, stressing supplies for households and farming, the potential for cancer-causing chemicals to seep into freshwater aquifers, risk of earthquakes, and the enormous number of truck movements disrupting local communities, not to mention the impact on global warming.
Josh Fox’s 2010 film “Gasland” showing images of households able to set fire to tap water containing methane and the recent outcry over possible contamination of drinking water supplies at Pavillion in Wyoming illustrate the concerns.
Now regulators and industry are starting to push back to ensure exploitation of tight gas and oil formations is not blocked by environmental and safety fears.
So far, the transformative potential of shale gas and tight oil has won over most regulators, politicians and voters; environmental concerns have been relegated to the background. Money talks. And the need for secure energy supplies is too important to ignore.
France, Bulgaria and some U.S. states have enacted bans or moratoriums on fracking. But the technology has won indirect endorsement from President Barack Obama and many other senior policymakers are quietly embracing it.
Even environmental groups are hesitating about whether to reject the technology outright.
“We all want American energy independence, but we have to do it right ... much more needs to be done to protect our communities and our environment,” according to a blog post by Natural Resources Defense Council President Frances Beinecke (“Obama calls for more clean energy and smart safeguards on domestic drilling”, Jan 25).
“We need to hold the industry to safety standards, set sensitive places off limits, and keep contaminants out of our air and water. Only government safeguards can achieve those protections. Industry has already proven that it will not police itself,” Beinecke wrote.
Nonetheless, policymakers and the industry are taking no chances. A huge confidence-building exercise is underway at national, regional and international levels to assure voters fracking can be done safely, without harming communities and sensitive landscapes, and without adding to the greenhouse effect.
DON’T USE THE F-WORD
The first stage is to reframe the issue. With all its connotations of earthquakes and toxic chemicals, fracking is increasingly the technology that dare not speak its name. Obama has been careful to avoid referring to it directly.
Speaking in Nevada on Jan 26 on “American-made energy”, the president would say only “because of new technologies, because we can now access natural gas that we couldn’t access before in an economic way, we’ve got a supply of natural gas under our feet that can last America nearly a hundred years”.
In his State of the Union address, the president referred to “technologies to extract all this natural gas out of shale rock”.
If fracking has negative connotations, shale gas is more neutral, and “new technologies” has a positive ring that is increasingly favoured by the administration and governments in other countries. Fracking is out. Shale gas and unconventional supplies are in.
Obama has stressed the importance of developing shale gas safely. “We will develop this resources without putting the health and safety of our citizens at risk,” the president insisted in his address. He promised companies drilling on public lands would be forced to disclose publicly the chemicals they use.
Regulators and industry appear to be reaching a consensus on safeguards to reassure voters the technology is safe.
“If [shale gas, tight oil, deepwater offshore and oil sands] are to be available and economic for development, continuous attention to reducing risks is essential to ensure pollution prevention, public safety and health, and environmental protection. These outcomes are important in their own right but also in order to enjoy access to the resources for extraction,” wrote the U.S. National Petroleum Council (“Prudent Development: Realising the potential of North America’s abundant natural gas and oil resources”, Sep 2011).
Royal Dutch Shell Chief Executive Peter Voser has acknowledged the industry must be more open about its operations - for example dropping its insistence the constituents of fracking cocktails were commercially confidential (“Shell targets North American tight oil”, Sep 22, Financial Times).
The U.S. Environmental Protection Agency is studying the environmental impact of fracturing, and the European Union has commissioned its own study of the current safeguards surrounding the practice.
The EU report concluded “neither on the European level nor on the national level have we noticed significant gaps in the current legislative framework when it comes to regulating the current level of shale gas activities...the activities relating to exploration/exploitation of shale gas are already subject to EU and national laws and regulations” including directives on drinking water and chemicals (“Final Report on Unconventional Gas in Europe”, Nov 2011).
Nonetheless, the International Energy Agency (IEA) has convened a meeting in March to discuss shale safeguards and plans to publish “golden rules for the gold age of gas” in May, the agency’s chief economist Fatih Birol told reporters at the World Economic Forum in Davos.
The agency’s report to the G20 will make recommendations for governments, regulators and the industry. “The good news is that (problems with drinking water and chemicals) can be addressed by best technologies and practices,” according to Birol.
The emphasis on sharing and enforcing best practice is in line with the industry’s own thinking and is unlikely to change practices much. A cynical observer might conclude this rush of studies and initiatives are less about developing new restrictions and are more of an assurance exercise to reinforce public confidence in existing safeguards by giving them increasingly high-level endorsement.
Fracking advocates must still tackle concerns about the global-warming potential of extracting all that extra gas and oil.
Here regulators and the industry are increasingly making twin environmental and national-security arguments: (1) cleaner-burning gas will increasingly displace dirty coal in power generation with a fraction of the carbon emissions; and (2) domestic gas and oil will displace reliance on unreliable oil imports from unstable countries.
Obama encapsulated the arguments with his usual rhetorical brilliance “We’ve got to keep at it. We’ve got to take advantage of this incredible natural resource. And think about what could happen if we do. Think about an America where more cars and trucks are running on domestic natural gas than on foreign oil.”
He went on to observe “And by the way, natural gas burns cleaner than oil does, so it’s also potentially good for our environment as we make this shift.”
The claim clean gas will displace coal is one reason why the president is more comfortable talking about the impact of new technology drilling for gas, and has been much quieter about the potential for fracking to unlock new oil reserves.
Whether this is all enough to make widespread fracking politically and socially acceptable is unclear. But most governments and the industry are pulling out all the stops to win acceptance for the most promising hydrocarbon technology to emerge in the last few decades and ensure it does not go the way of the nuclear industry. (Editing by Anthony Barker)