No fracking way

Some energy businesses turned off by pricey process of getting natural gas from beneath layers of shale

By: Scott Baughman//July 15, 2011//

No fracking way

Some energy businesses turned off by pricey process of getting natural gas from beneath layers of shale

By: Scott Baughman//July 15, 2011//

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Ray Covington, left, and Russ Knight, of North Carolina Oil and Gas, formed by landowners in Lee County, show a piece of shale in their office. Photo by Wesley Beeson, courtesy of The Sanford Herald

Decades’ worth of energy could be sealed up in shale in the piedmont of North Carolina.

But Robert Hardison, president of Status Oilwells Inc. in Charlotte, doesn’t really care.

Although some are calling for North Carolina to allow a controversial process known as hydraulic fracturing, or “fracking,” to harvest natural gas below the shale, Hardison is not among them.

“We haven’t tried any of the hydraulic fracturing,” he said. “It can get really expensive, and there’s a lot that goes into it. I’m just not sure it would be worth it here in North Carolina.”

Others would love the state to open the door to fracking, but, for now, that door is sealed shut.

In June, Gov. Beverly Perdue vetoed the North Carolina law that would’ve made hydraulic fracturing legal. A separate piece of legislation, House Bill 242, directs state officials to begin a study of fracking to see if the risks are worth it for the state.

HB 242 probably came as music to the ears of Tar Heel Natural Gas, which was formed earlier this year to try and take advantage of what some industry experts are saying will be a fracking boom in North Carolina.

According to The Associated Press, company letterhead was sent out last month to many landowners in Lee County with ready-to-sign contracts and ready-to-cash checks for the right to extract natural gas and oil from their land, be it via fracking or more traditional methods.

THNG officials did not return calls for comment.

Meanwhile, Status Oilwells, which was formed in 1996, makes most of its profit by taking over abandoned wells in West Virginia and getting them to reproduce gas or oil.

“Most oil wells produce gas and then we do have some strictly gas wells that make a very little bit of oil,” Hardison said.

A grizzled veteran of the petroleum industry, Hardison said the old-timers call that little bit of oil “nuisance oil” and it just gets in their way while trying to harvest the natural gas.

“It messes up the gas coming up out of the hole and then you have to swab it out or pull it out manually,” he said. “There is a big gas industry in West Virginia, but we really focus on the smaller stuff.”

State geologists say the formations of underground shale cover about 1,400 square miles and might have enough gas contained in them to supply North Carolina with 40 years’ worth of the fuel.

“House Bill 242 authorizes $100,000 to do the study and the other bill would have added another $100,000 to this budget,” said Vikram Rao, executive director of Research Triangle Energy Consortium in Raleigh. “It doesn’t change the fact that (North Carolina Department of Environment and Natural Resources) is going to do the study. If you look at the bill, they will basically study to identify what the pluses and minuses involved are.”

Rao, a former executive with energy giant Halliburton, offers advice to companies and government agencies on a variety of energy topics as the RTEC’s director.

“People refer to it as a fracturing study, but I would refer to it as a study regarding the potential of producing shale gas in North Carolina and to investigate the ability to do so in an economically and environmentally friendly fashion,” he said.

More attention should be paid to the environmental effects, but the economic benefits have already been investigated by some companies, like THNG, he said.

“The study should focus on what are the downsides to such production methods and how they can be avoided or ameliorated,” he said.

But harvesting natural gas via fracking is in some ways cheaper than the traditional method of producing liquid natural gas, he said.

The act of liquefying it, transporting it and de-liquefying adds about $3.50 per million British thermal units, or btus, to the price of traditional natural gas, Rao said.

“Right now, the price is $4 per million BTU,” he said. “Liquid natural gas doesn’t make a lot of sense.”

Rao said the abundance of shale gas and the availability is one of the reasons the price of gasoline has dropped. U.S. companies can take shale gas and make it into liquid natural gas.

Opponents and those with environmental concerns say fracking is dangerous for drinking water aquifers.

“I’m concerned what it means for North Carolina in that we’ll become like a lot of states like Pennsylvania and New York in that we allow this industry to come into our state without knowing what it means for our drinking water,” said Dean Naujoks, executive director of Yadkin River Keeper, a nonprofit preservation group.

The process of fracking typically involves drilling wells below the water table and then using high-pressure water mixed with other chemicals to force open the shale and release the natural gas.

“When you’re passing through ground water with a pipe that is not sealed properly, and you’re then extracting all the gas and the chemicals, you’re bound to have problems no matter where you are,” Naujoks said.

Rao agreed that improperly prepared wells and shafts would make fracking too dangerous.

“The world has always known this and there have always been regulations to complete the well in such a way as to not allow that leakage,” Rao said. “But mistakes get made and we are to keep in mind there are half a million active gas wells in America today. It is unlikely any of them are leaking, but if they were we would have an epidemic on our hands. It is my view a properly constructed shale gas well will not leak.”

One of the concerns about fracking is the cocktail of chemicals used in the process. Critics content that the chemicals are not made public and, therefore, raise concerns about public safety. This year, Texas Gov. Rick Perry signed into law a bill that requires companies to disclose the chemicals they use on hydraulic fracturing jobs in the state.

Rao said conventional fracking is done with water that has had sugar added from guar gum. But that mixture is used only in northern states, where the rock is less porous. Sugar can clog up operations that are based in shale beds like the ones in North Carolina.

“Pure water does not flow as well as you think,” Rao said. “You have to reduce the friction in the pipe by adding a polymer, then you add a biocide because bacteria in the reservoir are a real problem.”

Many companies use chloride or other formaldehyde-based chemicals as their biocide, but some are experimenting with using ultraviolet light or molecular iodine to kill the bacteria. To avoid clumping, the mixture needs a de-scaler, which is usually diluted hydrochloric acid or a similar acid.

It’s that cocktail that has environmentalists, like Naujoks, worried.

Meanwhile, Status Oilwells, which was formed in 1996, is making most of its profit by taking over abandoned wells in West Virginia and getting them to reproduce gas or oil.

For Hardison, there’s a simple reason he isn’t interested in fracking: It costs too much.

“We don’t have a drilling rig, and to get set up you need one of those or a lot of money,” he said. “You start drilling holes and go down 200 feet, you’re talking $200,000. One of those wells in West Virginia goes down 26,000 feet, which costs millions of dollars.”

Scott Baughman can be reached at [email protected].

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