Editor’s Note: Earlier this year, I published my take on the push against hydraulic fracturing, including the potential drilling ban in areas like the Marcellus shale formation. Ever since, I’ve been receiving a lot of questions and concerns regarding the process.
Truth is, most people — including the majority of its opponents — have no idea what is involved with hydraulic fracturing… or how important it is to the future of the North American natural gas industry. I’ve said this to investors a hundred times over: There will be no ban on the hydraulic fracturing in North America. These drilling and completion advancements are too important to the oil and gas industry.
Thanks to new drilling and fracturing techniques, areas like the Bakken oil play have been thrust into the limelight. That means only one thing for my readers: huge profits. They’ve raked in gains of 340%, 414%, and 127% on several Bakken drillers. The best part is that they aren’t even close to finished. Before the week is out, they’re going to make their next move. Read more about the next chapter of fortunes to be made with the Bakken in this report.
Today’s Energy and Capital comes from Keith Schaefer, as he brings readers an in-depth look at the hydraulic fracturing process and focuses on the heart of the debate: fracking fluid. Keith’s interview with Dale Dusterhoft, CEO of Trican Well Services, will make you think twice about your misgivings over the entire process.
Good investing,
Keith Kohl
Energy and Capital
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The fracking fluid industry is greatly increasing its R&D to make "greener" products. And while there is still room for improvement, says Dale Dusterhoft, CEO of Trican Well Services in Calgary, Canada, "we’re to a point now where we can offer a completely green fluid in some cases. We do "microtox" testing, which is very stringent. If a fluid passes that you can drink it, and we have fluids like that."
He said that his company — along with entire industry — is still needing to get completely green; "It’s a little more costly, but you can’t just do the cheapest alternative."
Fracking has come under increased scrutiny in the last two years, as residents who live near gas wells question if the practice — sending fluids down the well at ultra-high pressure to help oil flow in from rock formations — contaminates their drinking water.
(One reader who lives in the Barnett shale of Texas e-mailed me to say her issue wasn’t quality of water; it was that the quantity of water fracking uses had dried up the aquifer her well used.)
Ironically, Dusterhoft said the fracs used in the shale gas industry in North America (which has drawn the largest controversy, as these shales are now much closer to densely populated urban areas), use the simplest and least harmful fracking fluids.
"The fluids used in shale gas formations are quite generic, and there is not much differentiation between products," he said in a phone interview.
"The high-tech stuff with chemicals is used in deeper reservoirs, where there is higher pressure and hotter temperatures. These high-tech fluids are more viscous (gooey), whereas shale gas fluid is slippery water; a ‘slick water frack’ or friction reduced fluid. Those high tech fluids are more like Jell-O, and you have to add more chemicals to get them to that state. You can make that ‘green,’ but it’s more difficult."
So, what does it mean to "go green"? What, specifically, do you use in your products to make it more environmentally friendly?
"Well, it means taking all the hydrocarbons out of the system — getting them out and making them all water based. It means moving towards guars and starch-based chemicals (starches are also organic polymers and naturally grown) that are biodegradable and non bio-accumulating. We have to move away from synthetic polymers that are not biodegradable and we have to improve the biocides we use to control bacteria, which are the carrying fluid in a frack fluid."
"And people should not be afraid of the word polymers, as lots of food products have the same polymers we use. In our environmentally friendly fluids we try to use food grade polymers."
I asked Dusterhoft if he has to disclose the exact ingredients in his fracking fluid, and if not, would do so voluntarily.
"There is a controversy in having to disclose ingredients, and we don’t have a problem with that as long as it is general ingredients and not specific formulations."
Now this brings up an intriguing point.
Each state in the U.S. and province in Canada gets to set their own disclosure rules around what’s in fracking fluids.
And, because I live and work out of British Columbia, Canada, I put a quick call into the BC Oil & Gas Commission to see what fracking companies like Trican — as well as Calfrac and any other fracking company doing business here — are forced to disclose re: ingredients, by law.
"The British Columbia Oil and Gas Commission does not require companies to report contents of fracturing fluids on an individual basis," says Lee Shanks, Manager of Communications at the Commission. "But (it) does require operators maintain records of all fracturing operations and fluid content that the Commission can call upon for full disclosure at any time."
She added that there have been no complaints to the commission so far about fracking fluids impacting the environment anywhere in B.C.
Trican’s Dusterhoft said he will play by the rules, but isn’t going to go out of his way to be proactive in telling the market what specific recipes his company uses.
"My thoughts are that all the focus in the U.S. will result in the industry disclosing what’s in the fluids, just like on the cereal boxes," he said. "Trican is okay with this as we currently publish the families of chemicals we use. But we won’t publish to the public the specific ingredients and ratios of our fluids for competitive reasons."
"When asked we do publish our ingredients, in general families. But we don’t say how many tablespoons of this or that. Overall, I don’t want my competitors reading all this. They can do their own research and not just get it off our website. I think there is a balance like you have on the cereal box. List the ingredients and give families a choice."
Industry organizations say the issue is definitely on their radar screen…
Says Greg Stringham, VP of Markets and Oilsands for the Canadian Association of Petroleum Producers (CAPP): "Companies need to be open and transparent. We want to get out there and be as transparent as possible at the early stages of this issue."
Roger Soucy, President of the Petroleum Services Association of Canada (PSAC) says: "We have faced a related issue of the development of coal gas in several areas in Alberta. So we have dealt with these things before. Can (fracking fluids) be an issue? Sure — look at the oilsands. But in terms of disclosure of ingredients, is there a way this can work to satisfy the regulators to make everybody happy? I think so."
Kevin Heffernan, VP of the Canadian Society for Unconventional Gas (CSUG) added, "There is lots of communication going on between industry groups and regulatory bodies. That dialogue is well underway.
Each of three industry groups stressed that fracking fluids are employed thousands of feet — and often thousands of metres — below groundwater tables. The fact that oil or gas are trapped in these deep reservoirs after millions of years means that it’s impossible for liquids like fracking fluids to seep up through to groundwater."
Concluded Dusterhoft: "For some fluids, like slickwaters, all the technology is in place that we should be able to use environmentally friendly solutions."
Until next time,
Keith Schaefer
Publisher, Oil and Gas Investments
