Should Europe be fracking? CEPS Commentary, 5 October 2012

Underlining the fact that shale gas, like all natural resources, can only be used once, Daniel Gros observes in this CEPS Commentary that the real issue is not whether this resource should be developed in Europe, but when it should be used: today or tomorrow? Europe is already a heavy user of gas, but its consumption is stagnating (along with its economy). Despite the hype about the shale gas revolution, the extraction cost of (onshore) conventional gas remains below that of fracking. And lots of pipelines have already been built so that the marginal cost of bringing this ‘conventional’ gas to Europe is thus rather low. Thus, from an economic and environmental point of view, Gros argues that fracking is unlikely to bring large benefits for Europe and that shale gas might just substitute for conventional gas, which is plentiful.

Framing fracking: which frames are heard in English planning and environmental policy and practice?

Fracking in England has been the subject of significant controversy and has sparked not only public protest but also an associated framing war with differing social constructions of the technology adopted by different sides. This article explores the frames and counter-frames which have been employed by both the anti-fracking movement and by government and the oil and gas industry. It then considers the way in which the English planning and regulatory permitting systems have provided space for these frames within the relevant machinery for public participation. The article thus enables one to see which frames have been allowed a voice and which have been excluded.

Litigation against fracking bans and moratoriums in the US: exit, voice and loyalty

A number of US states, counties and municipalities have responded to the public health and environmental concerns surrounding fracking by imposing bans or moratoriums on unconventional oil and gas drilling. These restrictions have, in recent years, given rise to litigation challenges by oil and gas companies and by property owners deprived of potential revenues. The current article begins by examining precisely who has litigated. Have large companies dominated or is it mostly smaller independents? Is there a difference in litigation rates between private and public companies? The article then considers how Hirschman’s ideas of exit, voice and loyalty might apply in the context of bans and moratoriums and further explores some of the factors that may have driven litigation in the area.

Fracking, China and the Global Economy

We develop an intertemporal model of the international economy, where tradeable intermediate goods are produced with capital, labor and hydrocarbons, and used in the production of non-tradeable consumption and investment goods. The model is calibrated to 176 countries, grouped according to their characteristics. We conduct simulations about key events that are currently reshaping the world e.g., fracking and China's new model of development. The model reproduces closely the recent fall in oil prices and delivers results about the impact on global output and consumption, but also about the propagation to different countries through terms of trade and capital accumulation.

Discourses and values underpin public debate on fracking in Spain: a case study at the crossroad

In the EU context extraction of shale and oil gas by hydraulic fracturing (fracking) differs from country to country in terms of legislation and implementation. While fossil fuel extraction using this technology is currently taking place in the UK, Germany and France have adopted respective moratoria. In between is the Spanish case, where hydrocarbon extraction projects through fracking have to undergo mandatory and routine environmental assessment in accordance with the last changes to environmental regulations. Nowadays Spain is at the crossroad with respect to the future of this technology. We presume a social conflictt in our country since the position and strategy of the involved and confronted social actors -national, regional and local authorities, energy companies, scientists, NGO and other social organization- are going to play key and likely divergent roles in its industrial implementation and public acceptance. In order to improve knowledge on how to address these controverted situations from the own engineering context, the affiliated units from the Higher Technical School of Mines and Energy Engineering at UPM have been working on a transversal program to teach values and ethics. Over the past seven years, this pioneering experience has shown the usefulness of applying a consequentialist ethics, based on a case-by-case approach and costs-benefits analysis both for action and inaction. As a result of this initiative a theoretical concept has arisen and crystallized in this field: it is named Inter-ethics. This theoretical perspective can be very helpful in complex situations, with multi-stakeholders and plurality of interests, when ethical management requires the interaction between the respective ethics of each group; professional ethics of a single group is not enough. Under this inter-ethics theoretical framework and applying content analysis techniques, this paper explores the articulation of the discourse in favour and against fracking technology and its underlying values as manifested in the Spanish traditional mass media and emerging social media such as Youtube. Results show that Spanish public discourse on fracking technology includes the costs-benefits analysis to communicate how natural resources from local communities may be affected by these facilities due to environmental, health and economic consequences. Furthermore, this technology is represented as a solution to the "demand of energy" according to the optimistic discourse while, from a pessimistic view, fracking is often framed as a source "environmental problems" and even natural disasters as possible earthquakes. In this latter case, this negative representation could have been influenced by the closure of a macro project to store injected natural gas in the Mediterranean Sea using the old facilities of an oil exploitation in Amposta (Proyecto Cástor). The closure of this project was due to the occurrence of earthquakes whose intensity was higher than the originally expected by the experts in the assessment stage of the project.

Fracking/Takings

As the use of fracking has spread during the recent oil and gas boom, inevitable conflicts have arisen between industry and its neighbors, particularly as fracking has moved into densely populated urban and suburban areas. Concerned over the impacts of fracking – such as risks to health and safely, diminished property values, air and water pollution, as well as noise, traffic, and other annoyances – many people have demanded a government response. Government regulation of fracking has struggled to catch up, although in recent years many state and local governments have taken steps to reduce the impacts of fracking in their communities. This article focuses on government restrictions in New York and Colorado, two of the key battlegrounds in the fight over fracking. New York recently prohibited fracking across the entire state, after several towns had enacted their own bans. In Colorado, the people have used the ballot initiative process to enact restrictions on fracking directly. The industry has responded not only with public relations spending to improve the fracking’s damaged reputation, but also legal challenges to these efforts to rein in oil and gas development. In addition to suing local governments, often arguing they do not have authority to regulate fracking, industry threatens to bring costly takings claims for compensation due to alleged economic harms. This Article examines the numerous legal and factual issues that should make it difficult for industry to succeed on fracking/takings claims. First, regulation of fracking, even including outright bans, can almost always be defended as necessary to prevent a nuisance or other background principle of law that justifies government regulation. Even if a nuisance defense could be overcome, industry would have difficulty proving that regulation has destroyed all economic value in their property, unless courts take a narrow view of property that would highlight the arbitrary nature of the “denominator problem.” When fracking/takings claims are considered under the default balancing of the Penn Central case, takings are unlikely to be found except in rare outlier cases. Finally, because requiring governments to pay compensation in fracking/takings cases would likely create a windfall for industry, particularly if the oil and gas eventually is extracted in the future, courts should resist the temptation to rule against government restrictions to protect public health, safety, and the environment.

Fracking in der Schweiz? Im Zweifelsfall nein!

Die Gasgewinnung mittels Fracking stösst in der Schweiz vielerorts auf Opposition. Auch wenn kaum konkrete Projekte existieren, haben einzelne Kantone bereits Verbote beschlossen. Die sozialwissenschaftliche Analyse der politischen Prozesse hilft zu verstehen, wie es zu solchen Entscheidungen kommt. Ein häufiges Motiv: Fehlt das Wissen, kommt das Vorsorgeprinzip zum Tragen.

When petro-capitalism comes knocking: community interpretations and responses to the Gros Morne fracking controversy

With the depletion of conventional oil and gas sources, the world is turning to what Urry terms “tough oil,” such as oil from the Alberta oil sands and Arctic. Fracking is a prominent example of this. Situated within an environmental justice framework, I analyze community interpretations and responses to proposed fracking development near Gros Morne National Park, Newfoundland, Canada. Based on data generated from interviews, field observations and content analysis of texts, my findings suggest that how residents view rural place is highly significant in influencing supportive or oppositional positions on fracking. Proponents picture place as a resource extraction landscape, whereas opponents understand place as a restorative landscape for leisure/tourism activities. Through debates about fracking, place is contested and re-imagined. In many ways, fracking is a struggle over who has the power to define the meanings and characteristics of rural community in an era of tough oil and significant rural change.

Desarrollo del gas lutita (shale gas) y su impacto en el mercado energético: reflexiones para Centroamérica

La producción de shale gas o gas natural de lutita en los Estados Unidos ha sorprendido al mundo por su rápido desarrollo y repercusión en la disminución del precio del combustible y el aumento de reservas de hidrocarburos. Este desarrollo ha crecido junto con la oferta de petróleo y de condensados de gas natural. Se estima que los Estados Unidos serían autosuficientes en petróleo y superavitarios en gas natural en menos de 30 años. El renovado impulso de los hidrocarburos no-convencionales empieza a ser visto como una "revolución energética" que dará nuevo dinamismo a la economía de ese país. Por su novedad, la evaluación completa de estos desarrollos confronta dificultades metodológicas, estadísticas y de conocimiento científico, tecnológico, social y económico. Las regiones de los Estados Unidos y Canadá con yacimientos de shale gas comprobados son muchas. Sin embargo, dado lo novedoso de su explotación, no existe historial suficientemente largo para sacar conclusiones sobre procesos de exploración, picos y declives de producción y técnicas de recuperación de los recursos. Las analogías y extrapolaciones de las experiencias varían entre plays o conglomerados de yacimientos. Las dudas crecen ante la discordancia entre la creciente producción de gas y precios de mercado inferiores a los costos. También se escuchan advertencias sobre los potenciales efectos nocivos de su explotación en el medio ambiente y comunidades aledañas. Hay dudas sobre los posibles efectos de la técnica de "fracturamiento hidráulico" (fracking) y los disolventes químicos empleados en mantos freáticos y agua potable. Este documento se compone de cinco capítulos. En el primero se aborda el tema de la explotación de shale gas, desde el origen, la producción, la economía y los impactos de la exploración y producción de shale gas, hasta algunas peculiaridades del entorno de negocios y de los sistemas legal, financiero e impositivo. Dada su vasta experiencia en producción de hidrocarburos, los Estados Unidos cuentan con numerosas empresas proveedoras de bienes y servicios para la exploración y explotación de shale gas. Legisladores y autoridades de todos los niveles aplican instrumentos legales y procesan debates y opiniones para ir encontrando soluciones a los retos y cuestionamientos relacionados. En el capítulo II se presenta un análisis de escenarios y proyecciones al año 2035. Se discuten las dinámicas que pueden convertir a los Estados Unidos en exportador neto de gas natural. Se asume que el energético menos costoso termina dominado el mercado. Sin embargo, el shale gas tiene un largo proceso por recorrer antes de desbancar a las grandes industrias de energía con muchas décadas en el mercado. Se revisa el crecimiento de reservas y producción en abasto a una demanda creciente, que a su vez requerirá que los sistemas de transporte, almacenamiento y distribución de combustible se sigan expandiendo y que los precios de mercado continúen bajos o aumenten lentamente, mientras los del crudo serían sustancialmente mayores. Esta diferencia de precios está motivando la sustitución de combustibles. Las tecnologías de "gas a líquidos", "gas comprimido", "celdas de gas metano" y otras seguirán abriendo espacio, hasta sustituir las tecnologías basadas en hidrocarburos líquidos que han dominado el desarrollo energético por más de un siglo. La etapa de transición hacia lo que los teóricos consideran que será la era de los energéticos renovables se está volviendo realidad. Pero no hay indicios de que los combustibles tradicionales simplemente desaparecerán para dar paso a los energéticos renovables. Más bien, el shale gas se desarrolla como una nueva capa tendiente a envolver todo el mercado, sobre la cual se irá acomodando gradualmente el resto de los energéticos renovables. Así está sucediendo ya en la industria eléctrica debido a la flexibilidad de los ciclos combinados basados en gas natural, en especial su capacidad de reducir e incrementar su carga, conservando altos rendimientos térmicos. Esta flexibilidad permitirá que el resto de las fuentes alternativas (eólica, solar, mareomotriz y las que se vayan incorporando), cuya capacidad de generación es variable, se acomoden en forma combinada. En el III capítulo se describe la situación del gas natural en México, donde los bajos precios del combustible, el avance tecnológico, el manejo político del marco legal ambiental y social, además de la expansión de las redes de transporte, almacenamiento y distribución, también están cambiando. Se espera que el shale gas sea una nueva fuente de riqueza y de energía a bajo costo, pero, el proceso tomará varios años o décadas antes de que las expectativas se hagan realidad. Existen dudas sobre la forma de materializar este potencial en el país. Un primer problema para México es su propia definición constitucional de la propiedad y explotación de los hidrocarburos por un monopolio de Estado, Pemex. Este modelo resulta inadecuado para explotar shale gas a gran escala. Otro problema está representado por los altos costos de logística presionados por la rapidez del ciclo de producción, cuyos picos y declives se alcanzan a pocas semanas de iniciada la perforación. El declive puede ser tan rápido hasta volver incosteable mantener los equipos en un solo lugar por demasiado tiempo. Pemex no parece adaptada para trabajar en una dinámica logística de gran velocidad, en la que los equipos de perforación y de trabajadores deben desplazarse entre numerosas operaciones. Por estas razones, México parece destinado a experimentar una primera etapa consumiendo shale gas barato importado de los Estados Unidos. Para ello se construyen redes de gasoductos a lo largo de la frontera, por donde se irá recibiendo el gas y acostumbrándose a él. Después vendrán los grandes debates nacionales para decidir quiénes serán los protagonistas de este nuevo desarrollo, si Pemex o empresas privadas. Las reformas resultantes deberán plasmarse en la Constitución y reglamentarse en leyes secundarias; se diseñarán nuevos modelos impositivos y regulatorios. A esto se agregará la preocupación por los impactos sociales y ambientales de esta industria, la escasez de proveedores especializados y la necesidad de capacitar gran número de trabajadores, los cuales podrían ser contratados por Pemex o por el sector privado, dependiendo del modelo que se adopte en las reformas. El ritmo de aprovechamiento del shale gas mexicano será lento. Este reto no ha sido discutido en México. Se habla de los reacomodos del mercado de gas natural como fenómeno de corto plazo, referido a los precios presentes. Mientras tanto, el desabasto de gas natural se convierte en tema central de la política industrial. ¿Quién pagará el sobreprecio del gas natural licuado (LNG) en las escasas terminales de regasificación del país? En el capítulo IV se presenta el balance de exportaciones e importaciones de gas natural de América del norte. El reto de México a mediano plazo se perfila como la necesidad de desarrollar su propia industria gasera y extender las redes de gasoductos y de electricidad, hasta unir el sur y el norte del país, desarrollando simultáneamente la región oeste en la costa del Pacífico. Con el gas natural como punta de lanza, la industria energética irá configurando una nueva geografía industrial. Ahora corresponde al sistema político crear las condiciones institucionales para que esa dinámica se extienda por todo el territorio nacional. En el capítulo V se abordan algunas implicaciones y retos para los países de Centroamérica. Se discute la posibilidad de consolidar consorcios regionales sólidos, capaces de negociar contratos con México para abastecer gas natural a largo plazo, además de financiar los gasoductos necesarios. También se analizan algunos escenarios favorables en el caso de la negociación de suministros de gas natural en el marco de los tratados de libre comercio que los países de dicha subregión tienen con los Estados Unidos.

A Natural Gas Severance Tax-An Economic Analysis

This study estimates the economic effects of a severance tax on the market for natural gas produced from shale sources using non-conventional extraction methods, such as horizontal drilling and fracking. Results suggest that a severance tax of 5% would increase the price of natural gas by as much as 3.82% and decrease gas extraction by an estimated 1.16% to a value of 9.52%. If applied to the Commonwealth of Pennsylvania in the United States, a 5% severance tax is estimated to raise between US$443 and $486 million per year in public revenue. The marginal deadweight loss associated with a 5% severance tax is estimated between 1.27% and 12.85% of the last dollar earned. The burden of this tax falls on both producers and consumers and depends upon the underlying assumptions made regarding the price responsiveness of consumers and producers. Under plausible assumptions, a family consuming 1000 MMcfs (approximate to 2.8 x 10(4) m(3)) per year of natural gas is estimated to pay an additional $100 per year after the implementation of a 5% severance tax.

Diagenesis of a light, tight-oil chert reservoir at the Ediacaran/Cambrian boundary, Sultanate of Oman

The Al Shomou Silicilyte Member (Athel Formation) in the South Oman Salt Basin shares many of the characteristics of a light, tight-oil (LTO) reservoir: it is a prolifi c source rock mature for light oil, it produces light oil from a very tight matrix and reservoir, and hydraulic fracking technology is required to produce the oil. What is intriguing about the Al Shomou Silicilyte, and different from other LTO reservoirs, is its position related to the Precambrian/Cambrian Boundary (PCB) and the fact that it is a ‘laminated chert‘ rather than a shale. In an integrated diagenetic study we applied microstructural analyses (SEM, BSE) combined with state-of-the-art stable isotope and trace element analysis of the silicilyte matrix and fractures. Fluid inclusion microthermometry was applied to record the salinity and minimum trapping temperatures. The microstructural investigations reveal a fi ne lamination of the silicilyte matrix with a mean lamina thickness of ca. 20 μm consisting of predominantly organic matter-rich and fi nely crystalline quartz-rich layers, respectively. Authigenic, micron-sized idiomorphic quartz crystals are the main matrix components of the silicilyte. Other diagenetic phases are pyrite, apatite, dolomite, magnesite and barite cements. Porosity values based on neutron density logs and core plug data indicate porosity in the silicilyte ranges from less than 2% to almost to 40%. The majority of the pore space in the silicilyte is related to (primary) inter-crystalline pores, with locally important oversized secondary pores. Pore casts of the silica matrix show that pores are extremely irregular in three dimensions, and are generally interconnected by a complex web or meshwork of fi ne elongate pore throats. Mercury injection capillary data are in line with the microstructural observations suggesting two populations of pore throats, with an effective average modal diameter of 0.4 μm. The acquired geochemical data support the interpretation that the primary source of the silica is the ambient seawater rather than hydrothermal or biogenic. A maximum temperature of ca. 45°C for the formation of microcrystalline quartz in the silicilyte is good evidence that the lithifi cation and crystallization of quartz occurred in the fi rst 5 Ma after deposition. Several phases of brittle fracturing and mineralization occurred in response to salt tectonics during burial. The sequences of fracture-fi lling mineral phases (dolomite - layered chalcedony – quartz – apatite - magnesite I+II - barite – halite) indicates a complex fl uid evolution after silicilyte lithifi cation. Primary, all-liquid fl uid inclusions in the fracturefi lling quartz are good evidence of growth beginning at low temperatures, i.e. ≤ 50ºC. Continuous precipitation during increasing temperature and burial is documented by primary two-phase fl uid inclusions in quartz cements that show brines at 50°C and fi rst hydrocarbons at ca. 70°C. The absolute timing of each mineral phase can be constrained based on U-Pb geochronometry, and basin modelling. Secondary fl uid inclusions in quartz, magnesite and barite indicate reactivation of the fracture system after peak burial temperature during the major cooling event, i.e. uplift, between 450 and 310 Ma. A number of fi rst-order trends in porosity and reservoir-quality distribution are observed which are strongly related to the diagenetic and fl uid history of the reservoir: the early in-situ generation of hydrocarbons and overpressure development arrests diagenesis and preserves matrix porosity. Chemical compaction by pressure dissolution in the fl ank areas could be a valid hypothesis to explain the porosity variations in the silicilitye slabs resulting in lower porosity and poorer connectivity on the fl anks of the reservoir. Most of the hydrocarbon storage and production comes from intervals characterized by Amthor et al. 114488 preserved micropores, not hydrocarbon storage in a fracture system. The absence of oil expulsion results in present-day high oil saturations. The main diagenetic modifi cations of the silicilyte occurred and were completed relatively early in its history, i.e. before 300 Ma. An instrumental factor for preserving matrix porosity is the diffi culty for a given slab to evacuate all the fl uids (water and hydrocarbons), or in other words, the very good sealing capacity of the salt embedding the slab.

¿Ordeñar una Vaca Muerta? Articulaciones entre el modelo agroexportador y la fractura hidráulica en la Argentina del siglo XXI

La extracción de hidrocarburos no convencionales, mediante fractura hidráulica, se expande en Neuquén bajo la premisa de revertir el deficit en balanza comercial, asociado con la importación de combustibles. No se trata de una técnica innovadora ni de reservas recién descubiertas; el auge del fracking reside en su alta rentabilidad monetaria y en la promesa de que permitiría avanzar hacia la autosuficiencia energética a nivel nacional. Aunque es obvia la hegemonía del lenguaje valorativo del capital, dependiendo de la escala no es posible sustituir completamente flujos de energía por equivalentes en dinero. De ahí la importancia de considerar las articulaciones territoriales desde enfoques más amplios. En ese sentido, el objetivo general de este trabajo es estudiar dos flujos de energía claves para transitar hacia el autoabastecimiento energético en Argentina. Se analizan: i) el retorno energético de los hidrocarburos no convencionales en la cuenca neuquina, a partir de estimaciones para el yacimiento de Vaca Muerta, y ii) la evolución del consumo de combustibles asociada con las transformaciones recientes en el modelo agroexportador argentino. Con ello, se contribuye a reflexionar sobre la compatibilidad del modelo económico vigente y el tránsito hacia la autosuficiencia energética en nuestro país

¿Ordeñar una Vaca Muerta? Articulaciones entre el modelo agroexportador y la fractura hidráulica en la Argentina del siglo XXI

La extracción de hidrocarburos no convencionales, mediante fractura hidráulica, se expande en Neuquén bajo la premisa de revertir el deficit en balanza comercial, asociado con la importación de combustibles. No se trata de una técnica innovadora ni de reservas recién descubiertas; el auge del fracking reside en su alta rentabilidad monetaria y en la promesa de que permitiría avanzar hacia la autosuficiencia energética a nivel nacional. Aunque es obvia la hegemonía del lenguaje valorativo del capital, dependiendo de la escala no es posible sustituir completamente flujos de energía por equivalentes en dinero. De ahí la importancia de considerar las articulaciones territoriales desde enfoques más amplios. En ese sentido, el objetivo general de este trabajo es estudiar dos flujos de energía claves para transitar hacia el autoabastecimiento energético en Argentina. Se analizan: i) el retorno energético de los hidrocarburos no convencionales en la cuenca neuquina, a partir de estimaciones para el yacimiento de Vaca Muerta, y ii) la evolución del consumo de combustibles asociada con las transformaciones recientes en el modelo agroexportador argentino. Con ello, se contribuye a reflexionar sobre la compatibilidad del modelo económico vigente y el tránsito hacia la autosuficiencia energética en nuestro país