Gas industry tackles issues on ‘fracking’

Seeks to lessen fears with better transparency

Compared with the oil sands industry, the Canadian gas industry’s use of hydraulic fracturing, or ‘fracking’, has not faced the same wrath from environmentalists — yet.

That could change as the activity picks up pace in the country and stories from the United States work their way through “a bunch of concerns” here, says Kevin Heffernan, vice-president of the Calgarybased Canadian Society for Unconventional Resources. But the industry has learned its lesson from the oil sands debacle and is gearing up with greater efforts at more proactive transparency.

Fracking, the process of firing water, sand and chemicals at high pressure thousands of metres deep under ground to release and recover shale gas from tightly packed rock formations, has been blamed for contaminating water tables and even earthquakes, attracting regulator scrutiny.

Although 70% of all gas wells in Canada now use fracking, the treatment remains divisive even within various provincial governments. Shale gas-rich Quebec has slapped a moratorium on fracking, while Nova Scotia and New Brunswick are hamstrung by public backlashes, which has made exploiting relatively low reserves politically unappealing.

Meanwhile, pro-fracking provinces — Alberta, British Columbia and Saskatchewan — have allowed producers to use the method to access previously inaccessible gas resources.

“The practice started in the 1950s in Canada,” Mr. Heffernan says. “The only difference now is we are drilling long horizontal wells with multistage hydraulic fracturing — which began in the past six to seven years.”

Rich in Reserves

There is indeed much to frack, especially in Western Canada: Compared with conventional gas resources of about 692 trillion cubic feet, conservative shale gas reserve estimates suggest 1,111 tcf with another 1,311 tcf from tight gas — all of which is now accessible, thanks to fracking.

While it has revolutionized the U.S. industry, in Canada it has yielded mixed results, as it has depressed gas prices and reduced gas exports to the U.S., hurting local producers.

In fact, the National Energy Board expects natural gas production to decline slightly until 2015, from 13.5 billion cubic feet per day in 2011 to 13.1 billion cfd in 2015, before rebounding to 18 billion cfd by 2035, on the back of increased fracking.

The shale gas revolution has also spawned horror stories of earthquakes in Blackpool, U.K., and Ohio, and contamination of drinking water, primarily in the U.S. Northeast, where the practice has flourished.

This was amplified by the U.S. documentary Gasland, which showed residents near gas wells lighting their drinking water on fire due to the chemicals pumped into the ground by fracking crews.

While that freaked out the public, it is unclear that there have been any cases in which chemicals used in the fracking of unconventional gas wells have directly contaminated fresh water underground.

“However, migration of natural gas into drinking water supplies as a result of inadequate cementing/casing of gas wells, including modern shale gas wells, has been clearly established in multiple settings,” the Pembina Institute says in a briefing note, adding that in Pennsylvania, which is at the forefront of shale gas development, the industry has a poor track record in both preventing spills and safely disposing of waste water.

The Canadian Association of Petroleum Producers, an industry body, argues that 175,000 wells have been fractured in Alberta and British Columbia without a single incident of harm to groundwater.

Industry officials also argue that there are technological capabilities to overcome ecological issues — as long as every company gets on board.

“The reputation of the industry is as good as the last incident,” Simon Henry, chief financial officer of Royal Dutch Shell PLC, told the Financial

Post in a recent interview. “That’s a worry with low gas prices, because not everybody applies, or is required to apply, to [high] standards in gas production, particularly fracking. We would like to see those standards lifted to a point where we are all protected.”

To address the issue, CAPP launched fracking guidelines, which ‘obligate’ members to build sound well bore construction, seek fresh water alternatives, and disclose water usage and fracturing fluid contents.

While many in the industry see it at the forefront of best practices — certainly better than the shoddy practices in the U.S. — others say the document falls short on accountability.

“The principles are voluntary and compliance is measured on a reporting basis, but it is not reported to anybody,” says Matt Horne, acting director, climate change at the Calgary-based Pembina Institute. “So it is not really holding anyone accountable and there are no penalties for not complying. Also, it does not address cumulative issues such as greenhouse-gas emissions.”

CAPP says it does not have a mandate to regulate the industry and the practices have been developed and endorsed by member companies that aim to implement it.

“With regards to greenhouse-gas emissions: The recently released Weaver study by the University of Victoria made clear that natural gas is a cleaner-burning fuel than coal,” said Travis Davies, CAPP spokesman. “In fact, it burns 50% cleaner than coal, according to Cambridge Energy Research Associates, and it emits less nitrous oxide, sulphur dioxide, heavy metals and other toxic substances than coal when combusted.”

model Regulators

Numerous jurisdictions in the U.S. as well as Poland, New Zealand and Norway are looking to emulate Alberta and British Columbia’s fracking rules, industry advocates say.

From Jan. 1, British Columbia also became the first Canadian province to enforce public disclosure of ingredients used for hydraulic fracturing through a website that allows citizens to get a list of fracking fluids used in each well drilled in the province.

Yet the policies are not good enough for Quebec, which is in the midst of an environmental review, even though gas development is a crucial part of its multibillion-dollar Plan Nord.

Calgary-based Questerre Energy Corp., which has a significant interest in Quebec’s Utica/lorraine shale gas plays, says the province could generate up to 19,000 jobs each year and $1.1-billion in economic value if it allowed full development of the shale-rich fields.

“The industry is frustrated with Quebec,” says one industry executive, who does not expect the province to complete its review anytime soon. “They could have allowed work to continue, but they have chosen not to and it’s certainly not right,” he said, arguing that public backlash and hysterical concerns have changed the narrative on fracking.

Echoing the problems facing the oil sands industry, Mr. Heffernan says the industry has felt the backlash because of events in the U.S. but was not equipped to communicate to the media and public.

That could worsen as Mr. Horne expects more “surprises in terms of what’s happening underground,” such as water contamination separate from poor well-casing, and seismic activities.

“I don’t think we have all the policy frameworks i n place at the moment.... It has pretty significant water demands on the industry. And we don’t know whether we can meet that demand.... I don’t think there should be an open bonanza on development.”

In any case, the industry is gearing up for the battle.

“For the most part, the industry’s practices and benefits were understood within the community it operated in,” Mr Heffernan says. “But now it’s much bigger and much more visible. People from every walk of life are making observations and drawing conclusions because there is an information gap. We weren’t especially skilled at communicating what we did, and that is recognized by the industry. You will see over the next year a lot more public communication happening.”