Amid all the buzz of US energy independence, a single environmental concern has the potential to stop our exploding oil and gas sector dead in its tracks…
The U.S. oil and gas sector has been humming along nicely over the last five-plus years.
America’s shale formations are proving to be every bit as bountiful as we had envisioned decades ago.
With the amount of fuel we’re able to pump out from our wells, the potential to become net energy exporters grows more and more each day.
Job creation and the ripple effect that the petroleum industry has on the broader economy cannot be understated either.
But not all is well in Washington.
A couple weeks ago, Democrats on the House Energy and Commerce and Natural Resources Committees issued a letter to the committees’ Republican chairs, requesting a hearing on the potential correlation between injecting drilling waste underground and seismic activities.
The letter cited a number of recent credible studies that argue an increasing rate of earthquakes occurring beneath certain regions of our country is being caused by waste injection operations.
Regardless if this is another episode in a long line of political mud-slinging between the two parties, this issue could have grave consequences — and not just with our quest to be the world’s top energy producer.
Now if the cause of these earthquakes turns out to be true, appropriate action should be taken immediately to prevent more of them from happening.
Meanwhile, a number of services critical to the energy industry are now under threat.
The most notable is hydraulic fracturing.
As large amounts of water and proppants are used to crack open shale rocks to extract oil and gas at a drill site, the pressure from the injections and resulting waste water left underground is believed to be responsible for a number of small to mid-sized earthquakes in the surrounding region.
Researchers at Columbia University say that the resulting mini-quakes could be precursors to larger quakes as fault lines get pushed closer together.
Similar claims are being made against enhanced oil recovery technology, where the injection of carbon dioxide into oil wells help release trapped oil to maximize production capacity.
Scientists at the University of Texas at Austin have linked a series of magnitude-3 and larger earthquakes to gas injection at the Cogdelloil field in northwest Texas.
And if there hasn’t been enough bad publicity for the coal industry already, its adoption of carbon capture and storage technologies is also under intense scrutiny as a cause of earthquakes.
A geophysics professor at Stanford University argues that the injection of massive quantities of CO2 back into the earth’s crust creates small pressure build-up near fault lines, resulting in fault slips which then lead to “induced seismicity”.
In Oklahoma, both the US Geological Survey (USGS) and the Oklahoma Geological Survey (OGS) have stated that there’s been an over-tenfold increase in earthquake frequency in Oklahoma since 2009, a region that’s grown significantly with petroleum exploration and production activities.
That being said, the USGS has stopped short of stating that fracking and other disposal processes are responsible for all the earthquakes.
While their analysis found that a contributing factor to the increase “may be from activities such as wastewater disposal,” the causation is inconclusive.
Rather, the USGS suggests that “the actual hydraulic fracturing process is only very rarely the direct cause of felt earthquakes” and that ” wastewater associated with hydraulic fracturing has been linked to some, but not all, of the induced earthquakes”.
To that end, more research is required, which is why the Natural Resources Committee is seeking further discussion on the matter.
Fortunately, induced seismicity has yet to snowball into a full-blown media firestorm. However, should the issue begin to gain traction, there may be some serious repercussions in store for the energy sector.
While I’m not going to make any stock recommendations relating to this turn of events at this time, it is something you should be aware of as it could have an affect on your portfolio in the future.