Fracking – don’t poke the bear

Ian McInnes looks at the recent controversy around Cuadrilla’s fracking practices and considers some of the risks.

To release the enormous potential energy resources from shale beds deep beneath the surface drillers use a method known as hydraulic fracturing, often referred to as, “fracking.” Horizontal shafts are drilled from a vertical one and then a combination of millions of gallons of water, chemicals and sand are injected, pressure builds up along the shaft and the shale fractures releasing some of the oil and/or the gas trapped within it. In the US, where fracking went full steam ahead for years and has only recently been the subject of more regulatory scrutiny, the drilling method has been cited as possibly causing water pollution and sometimes being linked with the occurrence of earthquakes.

In the UK, near Blackpool in Lancashire, Cuadrilla Resources, an independent company set up in 2008, has deployed fracking techniques to explore the Bowland Shale for shale gas. It is possible that there may be enough shale gas in the formation for all of the UK’s needs for 18 months and Cuadrilla has announced that there may be up to 200tnft3 of natural gas in place within its licensed area.

So far. So good. However, unlike large areas of the US, the UK is densely populated and has a very active and sometimes strident media. Cuadrilla has already attracted environmental protesters, including a group that calls itself, “Frack Off.” In April and May 2011, there were two earthquakes measuring 2.3 and 1.5 on the Richter scale respectively that occurred near to the company’s Preese Hall-1 well. On 28 June 2011 the company announced that it had, with the agreement of the UK Department of Energy and Climate Change (DECC), suspended fracking operations at the Preese Hall-1 well and agreed to produce a detailed geo-mechanical report for DECC. According to a recent report in the Scottish Herald, Cuadrilla has admitted that there were some 50 earthquakes in the region during an eight-month period.

On 2 November 2011 Cuadrilla published the report, “The Geo-mechanical Study of Bowland Shale Seismicity.” The company added that it would be seeking a peer review of the report and publish the findings. To be honest, no matter which way it is dressed up, the report does not bode well for Cuadrilla’s operations and may well dent the aspirations of other companies operating in the UK and indeed further afield. The report concludes that it is, “Highly probable that the hydraulic fracturing of Cuadrilla’s Preese Hall-1 well did trigger a number of minor seismic events.” There is some mitigation that none of the seismic events caused any structural impact on the surface and the company said that the report noted that, “Seismic events were due to an unusual combination of geology at the well site coupled with the pressure exerted by water injection as part of operations. This combination of geological factors was extremely rare and would be unlikely to occur together again at future well sites.” Furthermore, the report said that, “If these factors were to combine again in the future local geology limits seismic events to around magnitude 3 on the Richter scale as a worst-case scenario.

What happens next if and when Cuadrilla resumes drilling, hopefully nothing, will undoubtedly be under intense media and government organisation scrutiny. However, playing devil’s advocate for a moment, with the company being linked with causing seismic activity, what if a tremor caused some structural damage, surface or sub-surface? Does that mean that Cuadrilla would be made accountable for millions, perhaps billions, of dollars in compensation claims? For a comparatively small company like Cuadrilla and especially for its insurers, this scenario is not conducive for good sleep.

Into an, excuse the pun, fractious environment, another company, Greenpark Energy, based in Berwick-upon-Tweed has reportedly been given a licence from the Scottish Environmental Protection Agency (SEPA) to extract trapped methane gas in coal beds that lie beneath the village of Canonbie in Dumfries and Galloway. While the company, which says that it holds 38 onshore licences in the UK, reportedly said that it was not carrying out any drilling or fracking operations in Scotland at the moment, it is highly likely that fracking will be the most viable option for Canonbie. If and when drilling commences, any seismic activity in the area will most likely hit the news very quickly.

With the “The Geo-mechanical Study of Bowland Shale Seismicity,” report linking a probability of seismic activity to fracking, a recent, much larger spate of earthquakes in Oklahoma, the largest of which measured 5.6 on the Richter scale on 6 November 2011, has people sitting up and taking notice. The state has over 185,000 drilling wells with reportedly hundreds of these being injection (fracking) wells. Smaller quakes in Oklahoma measuring up to 2.8 on the Richter scale have reportedly been linked with the practices of fracking. Overall, the process of injecting water deep underground and extracting oil from reservoirs that subsequently collapse over the years is pretty well documented as being linked to seismic events going back to the 1930s. Nevertheless, the larger Oklahoma earthquakes were on known fault lines and while seismic activity of this magnitude is rare it is not impossible.

If there is smoke, there is usually fire. There are just too many coincidences for there not to be some relationship between injecting fluids at high pressure deep underground and fracturing shale or coal beds and seismic activity. Without certain knowledge there is always going to be an element of doubt as to where it is safe to drill and these locations may not always coincide with where, commercially, it is best to drill. It may be prudent perhaps essential, to proceed with extreme caution with fracking where seismic activity is concerned and some of the juniors will simply not have deep enough pockets. For if they can be linked to damaging seismic activity caused by fracking it may be game over. Even shale energy exploration may just prove to be risky in some areas to be carried out other than by companies that can stand the consequences of a problem. If you have to poke the bear, get another bear to do the poking.