Hydraulic Fracturing Emerging Issues in North America

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Hydraulic Fracturing Emerging Issues in North America University of Sao Paulo, SP, Brazil Allan Ingelson Executive Director, Canadian Institute of Resources Law & Associate Professor, Faculty of Law, University of Calgary March 31, 2015

Hydraulic Fracturing (Fracking) Fracking of conventional oil and gas wells since the 1940s Facilitate economic flow of oil and/or natural gas from tight formations (low permeability

Fracking Conventional hydrocarbon reservoirs in North America normally fracking of limestones and sandstones More than 1.2 million wells fracked world wide

Shale Fracking in U.S.A. George Mitchell (1919-2013) pioneered development of light sand fracking of shale in Texas started in the1980s Technological innovation characterizes the U.S. and Canadian oil and gas industries Devon Energy acquired Mitchell s company in 2002 for U.S. $3.5 billion

A Natural Gas Revolution Combining horizontal drilling with fracking has facilitated economic development of shales in the U.S.A. and Canada Daniel Yergin in chapter 16 of his book The Quest (2011) uses the term Shale Gas Revolution

Shale Gas Plays in North America

Fracking U.S. Oil Production Source: U.S. EIA Energy Outlook 2014, http://www.eia.gov/forecasts

Fracking U.S. Natural Gas (NG) Exports & Imports Source: U.S. EIA Energy Outlook 2014, http://www.eia.gov/forecasts

Fracking NG Overtakes Coal for Electricity Generation Source: U.S. EIA Energy Outlook, http://www.eia.gov/forecasts

Forecast of U.S. Energy Production By Fuel 1980-2040 Source: U.S. EIA Energy Outlook 2014, http://www.eia.gov/forecasts

Canada Energy Forecast Source: National Energy Board, Canada s Energy Future 2013 http://www.neb-one.gc.ca

Canadian Oil Production Forecast Source: National Energy Board, Canada s Energy Future 2013 http://www.neb-one.gc.ca

Canadian NG Forecast Source: National Energy Board, Canada s Energy Future 2013 http://www.neb-one.gc.ca

Future U.S. and Canadian NG Exports Planning LNG exports U.S. LNG exports from the Gulf Coast Canada LNG exports from Western Canada to Asian Markets

A Global Natural Gas Revolution?? The shale oil and gas production potential is being evaluated in other countries Economics North America has a well established pipeline infrastructure that has facilitated shale gas development

Bakken Shale U.S. and Canada

Fracking Environmental Issues 2 significant controversial issues 1) Water Contamination 2) Induced seismicity

Council of Canadian Academies (CCA) 2014 Report Reports on the state of knowledge of potential environmental impacts from exploration, extraction and development of Canada s shale gas resources

CCA 2014 Report Findings HF technologies and processes are understood but need more research on potential environmental impacts Existing information on potential environmental impacts is inadequate and inconclusive

CCA 2014 Report Findings The regional context for potential environmental impacts can vary depending on the type of shale, depth of the shale proximity to aquifers and groundwater can vary Different ecosystems in different areas Volume of water available can vary in different regions

Sources of Water Contamination Injected Fracking fluid subsurface Flowback fluids accidental spills surface Adequate fracking fluid storage & disposal

Fracing Fluid Water Contamination? Fracking fluids typical components 90% water 9.5% sand 0.5% other chemicals

Water Contamination from Fracking Fluid Water contamination from fracking chemicals? Reluctance of oil and gas service companies that use fracking fluids to disclose the contents of fluids to landowners and the public Why?

Fracking Fluid Chemical Disclosure Fluid contents Trade secrets Most U.S. state regulators and Canadian provincial regulators require disclosure of some information about the general chemical and additive content of fracking fluids Disclosure on publicly accessible websites like fracfocus.ca

Fracking Fluid Chemical Disclosure For more information see Allan Ingelson & Tina Hunter, A Regulatory Comparison of Hydraulic Fracturing Fluid Disclosure Regimes in the United States, Canada and Australia, 54(2) Natural Resources Journal 217-253 (Fall, 2014)

Fluid Disclosure Regulatory Requirements in Alberta AER Directive 059: Drilling and completion data filing requirements All operators must submit at least the type, quantity, and size of propping agents, type and volume of carrier (fluids), additives, type and quantity of plugging agents, feed rates and pressures

BC Regulator Requirements BC Oil and Gas Commission Oil and Gas Activities Act (OGAA): 2008 to 2010 water withdrawals Operators must maintain a record of fracturing fluids and produce records upon request

Well Integrity During fracking operations, pressures may lead to a loss of well integrity and water contamination Need to design, construct and operate a well to maintain well integrity during fracking

Well Integrity Alberta has revised its regulatory requirements AER Directive 083: Hydraulic Fracturing Subsurface Integrity (May 2013) Regulator must approve the type of barrier system used in oil and gas wells Single-barrier and dual barrier systems may be approved

Inter-wellbore Communication Release of fluids and or gases from the subject well to an offset well Potential subsurface water contamination Potential release of fluids at surface blowouts

Inter-wellbore communication (IWC) 21 unintentional communication incidents To prevent IWC the Alberta Energy Regulator requires fracking risk planning under Directive 083 The proposed fracking program submitted to the regulator for approval must include:

IWC Planning a) determination of a fracking planning zone; b) identification of all offset wells; c) assessment of the well integrity for each offset well; d) a risk-assessment for each offset well;

IWC Planning e) identification of energizing gases in fracing fluids; f) assessment of special-consideration wells for well control planning

Nonsaline Aquifer Protection Regulator requires a risk assessment if proposed fracking above or within 100 meters below the base of groundwater protection (modelled depth)

Fracking and Water Wells Fracking near water wells the regulator requires operators not to adversely affect water wells Fracking operations must not occur within a zone that extends 200 meters horizontally from the surface location of a water well and 100 meters vertically from the total depth of the water well. (Dir 083)

15 other AER Regulatory Directives Fracking Dir. 009 Casing Cementing Minimum Requirements Dir. 008 Surface Casing Depth Requirements Dir. 058 Oilfield Waste Management Requirements Dir. 055 Storage Requirements for the Upstream Petroleum Industry

Volume of Water Used in Fracking Fluids Water withdrawn from lakes, creeks and rivers Competing uses for drinking and other industrial uses A more contentious issue in arid areas

Volume of Water Regulators monitor and approve the volume of water used Emphasis on treating and remediating flowback water from fracking operations and reusing that water

Induced Seismicity An Emerging Issue Earthquakes natural seismic events United States Geological Survey (USGS) monitors earthquakes Older U.S. oil and gas fields seismic events caused by the injection of wastewater (can be fracking flowback water into disposal wells)

Induced Seismicity Fracking operations may cause induced seismicity Fox Creek, Alberta earthquake measuring 4.4 on the Richter scale on January 22, 2015 Alberta Geological Survey and Alberta Energy Regulator use 53 monitors to measure seismic events

Induced Seismicity Regional Alberta Observatory for Earthquake Studies Network Operators must evaluate potential for induced seismicity from fracking before operations proceed and be prepared to implement a response plan. AER Bulletin 2015-03

Induced Seismicity Operators are required to monitor seismic activity Operators must immediately report any seismic events of 2.0 local magnitude or greater near their operations* *Seismicity in Alberta, see http://www.aer.ca/about-aer/spotlight-on/seismicity-inalberta

Induced Seismicity If an operator observes a seismic event of 4.0 or more must immediately stop fracking operations and report event to the regulator Induced seismicity as part of my research I am working on an multi-disciplinary team

Best Industry Practices 2012 The Canadian Unconventional Gas Industry has been more proactive than its US counterpart in addressing environmental issues

Canadian Best Industry Practices adopted in 2012 Operating practices adopted by the Canadian Association of Petroleum Producers adopted April 2012 1. Public disclosure of fracking fluid contents on a well-by-well basis 2. Companies must develop well-specific risk management plans

Canadian Best Industry Practices 2012 3. Baseline Groundwater Testing of landowner water wells and regional groundwater monitoring systems 4. Operators must ensure wellbore integrity before they start fracking use sound wellbore design and construction; these practices will be publicly available

Canadian Best Industry Practices 2012 5. Water use for fracking fluids, measurement, sourcing and reuse recycling practices publicly available 6. Fracing fluid transport, handling, storage and disposal practices publicly available