The development of hydraulic fracturing techniques to release gas and oil trapped in shale has been hailed as offering a bridge to a low-carbon future for energy-hungry developed and emerging economies. But concerns about contamination of water supplies, release of combustible gas, destruction of natural environment, worker safety and true green credentials are sufficient for many to ask whether the rush to develop shale gas fields throughout the world, but especially in the US, runs the risk of long-lasting damage to landscapes, communities and workers.
Hydraulic fracturing, or ‘fracking’ is a drilling technique involving blasting tonnes of water, sand and chemicals into shale rock formations. In the US, the gas released as a result is thought capable of providing enough natural gas to supply the country for the majority of this century. Worries over the environmental effect of this extraction method, though, cloud the future. These concerns are magnified by the apparent soft-touch regulation that affects the shale gas industry. Fields in the US state of Pennsylvania are thought to offer sufficient gas to last the entire US for 10-20 years. But occurrences of explosions at works run by Chesapeake Energy which injured three workers in the State last February, are just one of the risks the drilling holds.
On the environmental impact of fracking, considerable debate ensues. In some countries, notably France, pressure is being applied to law-makers to rescind existing shale gas drilling agreements. In France, there have been loudly voiced concerns about the impact of fracking on the water supply, with scientists warning of toxic gas release and increased salinity in drinking water. One year after the BP Deepwater Horizon disaster released thousands of barrels of oil into the Gulf of Mexico, another Chesapeake gas well blew out during fracking, raising fears about the safety record of this unconventional form of fossil fuel extraction.
And yet many energy analysts expect this method of gas extraction to continue to be developed fast. One of the main drivers of this is the energy security it offers countries. Oil-dependent states are at the mercy of producers in the middle-east and eastern Europe for their supplies. As ‘peak oil’ nears, its price is likely to increase, especially given political upheaval in some Arab states. The recent nuclear catastrophe at Fukushima, Japan and 25th anniversary of the Chernobyl disaster, serve as warnings of becoming dependent on nuclear power for our energy needs. Shale gas offers a fix for the next few decades, cutting reliance on countries like Russia and Saudi Arabia to keep economic activity moving.
But a natural gas well spewing thousands of gallons of fracking fluid in northeastern Pennsylvania is not the best PR for an industry that many welcome, but some fear – however inevitable its continued growth appears. The 2010 film, ‘Gasland’ offered some spectacular footage of flames igniting from a tap at a kitchen sink, although the linkage between this and fracking is hotly disputed. However, recent statements by US leaders seem to signpost more formal regulation of the industry, but opponents are reconciled to the ongoing rollout of shale gas drilling, given the energy security it offers. The final point to consider is whether natural gas is a green energy source and fracking a sustainable method of extraction.
The green issues are complicated, involving claim and counter-claim by opponents and industry insiders. Burning gas in power stations produces around half of the carbon emissions of coal. Greenhouse gas emission limits may be cheaper to attain by using shale gas, rather than renewable energy production, say company lobbyists. This is disputed by many academics and environmentalists, who believe that natural gas can only be part of a solution to the problem of achieving carbon neutrality, at best.
This is an extremely complex case study, but it offers an excellent source of learning about a whole range of topics, from price signals, externalities and opportunity cost in economics, through environmental impacts of business activity, to geo-politics and the importance of market analysis.