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Waterless Fracking Method Could Sidestep NY Gas Drilling Ban

Amid skepticism from engineers and environmentalists, landowners and drilling company bet on LPG fracking, which uses propane instead of water.

Apr 16, 2012
Map of primary aquifers and Marcellus Shale extent in NY

A plan to extract shale gas and oil from 135,000 acres in Tioga County, N.Y., could break through the state's hydraulic fracturing moratorium, because the wells would be fracked not with water but with liquefied petroleum gas, or LPG, a mixture of mostly propane.

A relatively new technology, LPG fracking doesn't fall under New York's current hydraulic fracturing moratorium. Instead it could be permitted under the New York Department of Environmental Conservation's 1992 Supplemental Generic Environmental Impact Statement, according to Emily DeSantis, the DEC's director of public information.

DeSantis said LPG fracking would also require an additional assessment under the state's Environmental Quality Review Act, or even a separate environmental impact statement "if the proposed activity may result in significant adverse environmental impacts not previously or adequately addressed."

New York placed a moratorium on hydraulic fracturing in 2010, after environmentalists and some residents began worrying that hydraulic fracturing might contaminate the watershed that supplies water to New York City and other parts of the East Coast.

The moratorium won't be lifted until a new Supplemental Generic Environmental Impact Statement is complete. The DEC expects to finish the work on that document by the end of the year.

The Tioga County Landowners Association announced in March that the 2,000 families it represents will lease 135,000 acres to Houston-based eCorp International. The fracking will be done by Calgary-based GasFrac Energy Services, which pioneered the LPG process.

InsideClimate News and the Albany Times Union reported in November that while LPG fracking still faces skepticism and comes with its own risks, it has several environmental benefits. By forgoing the use of water, it eliminates an entire waste stream—the toxic "flowback" water. GasFrac also claims that LPG requires 75 percent fewer truck trips and a smaller well-pad than hydraulic fracturing.

Details of the Tioga County contract are still being worked out, but under the tentative plan the landowners will form a Limited Liability Company and will essentially be given stock in the venture, in addition to royalty payments of 12.5 percent of the value of the oil or gas that is retrieved. eCorp will provide financing and GasFrac will frack the wells, which could extract natural gas from the Marcellus Shale and also oil from the less-explored Utica Shale. eCorp estimates that each well will be about three to five acres large and will drill under roughly 3,200 acres of surrounding land.

"We believe this game-changing technology will be embraced by, not only regulators and the industry, but the general population as well," eCorp CEO John Thrasher said in a news release announcing the deal with GasFrac. The two companies have also signed a memorandum of understanding for potential work in some of the "premier basins of western Europe."

"We believe that propane/butane gel could very well become the shale 'treatment of choice' in all countries because of its many technical and environmental benefits relative to large volume 'slick' water fracking techniques," Mark Stauss, a senior director at eCorp, told InsideClimate News. Specifically, he said, the company is interested in shale basins in the United Kingdom, Switzerland and France.

Hydraulic fracturing is just as controversial in Europe as it is in the United States. France, for instance, has banned it. But Stauss said he thinks LPG fracking might be adopted more quickly "based upon the merits of the arguments in favor of the technology."

So far, the environmental community seems skeptical of LPG fracking. Fifteen groups, including the Sierra Club, the Natural Resources Defense Council and Riverkeeper, sent a letter to the New York DEC on April 11, urging the agency to perform an environmental impact statement prior to permitting any LPG wells and describing LPG in general as a technology with "alarming" known and unknown risks.

Deb Nardone, from the Sierra Club, said in an email that, given the risk of explosions, "it is clear that propane fracking just substitutes one set of problems for another set of even more dangerous problems."

Mark Brownstein, from the Environmental Defense Fund, which did not sign the letter, said he thinks waterless fracking is a positive sign that the industry can reduce its environmental impacts, although the group hasn't taken a position on LPG yet.

Stuart Gruskin, who was the DEC's deputy commissioner from 2007 to 2010 said he's withholding judgment on LPG. Like other observers, he wants to see more data on the process’s results and safety. Gruskin does think the rise of LPG is a sign of positive trends in the evolution of fracking, as companies, faced with environmental concerns and regulations, look for solutions to wastewater problems, such as onsite recycling.

Gruskin thinks efforts by the Tioga group and other landowners are helping to push the industry towards cleaner fracking methods. "Some of the most ardent environmentalists are landowners," he said. "They're interested in both taking care of their land and water and developing this resource."

'If You Don't Have to Use Water'

The Tioga County project began with Nick Schoonover, who has spent the last three years arguing that gas drilling would not only be a boon to upstate New York's struggling economy, but could also be smartly managed to minimize its environmental impact.

Schoonover formed the landowners group in 2008, after he retired from a career as an electrical engineer at IBM. He thought he'd spend a year helping negotiate a natural gas drilling lease for what was at the time a few dozen families, many of them farmers. But then New York's hydraulic fracturing moratorium took effect and a debate over gas drilling's role in the state's economic and environmental future began. The New Assembly passed the moratoriumin 2010 and then extended it in 2011.

"That's when I was hauled into the abyss," Schoonover said.

Schoonover grew up in Tioga Center, a small town along the Susquehanna River's north branch, and he traces his family roots in the area to 1790. While he thinks hydraulic fracturing is generally safe, he also thinks it comes with real environmental risks, such as the huge amounts of toxic wastewater it produced.

Even in 2008—before wastewater disposal was linked to earthquakes in Ohio and potentially harmful levels of contaminants in Pennsylvania rivers—Schoonover was interested in finding the most "technologically advanced" form of fracking. Better yet, he wanted to find a company that didn't use water. "If you don't have to use water, why would you?" he wondered.

In 2009, Schoonover started talking with GasFrac's chief technology officer, Robert Lestz, who largely invented the modern form of LPG in the early 2000s, when he was a research engineer at the California-based oil and gas giant Chevron.

At that point, GasFrac had been working primarily in western Canada and its technique was considered unproven, especially for use in shale formations. But the technology appealed to Schoonover, because it eliminated the waste water problem and simplified the drilling process. GasFrac also claims that LPG can extract more oil and gas than water.

LPG fracking performs the same function as hydraulic fracturing: using sand or another "proppant" to create and hold open cracks in dense rock formations, it releases oil or gas. Sometimes mixed with butane and other additives, the propane is pressurized to the consistency of a gel, which carries the proppant through pipes into the rock underground. Unlike water, though, LPG naturally mixes with petroleum, so it returns to the surface with the oil or gas being extracted. And since LPG is electrically neutral and lacks much friction, it doesn't dissolve and bring back to the surface the salts, heavy metals or radioactive compounds that water-based fracking extracts from the rock underground.

Amid Skepticism, LPG Grows

The Tioga County deal is a big boost for a young company like GasFrac, but just how effective and profitable LPG will be is still subject to debate.

Among the skeptics is Anthony Ingraffea, a Cornell University engineer who spent 20 years researching fracking mechanics for Schlumberger, one of the largest fracking companies. Ingraffea is a fierce critic of the oil and gas industry and he opposes new drilling in New York. As an engineer, he said he needs to see some hard data about GasFrac’s work before he can assess LPG's performance, and so far it's not available.

"I'll give them credit that geochemically, it's much better to use a hydrocarbon [propane and butane] to stimulate a reservoir," Ingraffea said. "But I'm not sure how well this technique will work in a high volume long lateral shale formation, because they haven't released proprietary data. That's still unknown."

Lestz, GasFrac's chief technology officer, said it is up to the companies he has worked with to release that data, and they may not want to do that because of competitive concerns.

Recent deals, official and rumored, suggest that more oil and gas companies are willing to experiment with LPG.

San Antonio-based BlackBrush recently announced a two-year contract with GasFrac in the oil-rich Eagle Ford Shale in Texas. Phil Mezey, BlackBrush’s co-CEO, said in a news release that using LPG brought "oil production at a sustainable rate weeks earlier than with the standard water frac and we are seeing huge savings on disposal of frac fluids."

Last year, Chevron, one of the world's largest oil and gas companies, used LPG to frack several natural gas wells in the Piceance Basin, home to several lucrative coal, oil and natural gas deposits in northwestern Colorado. The technology "significantly increases production while minimizing water usage," the company said in its annual report, which did not mention GasFrac by name.

GasFrac has also fracked several oil wells in Colorado's Niobrara Formation. Although GasFrac hasn't released the name of its customer, some investors have speculated that it is Fort Worth-based Quicksilver Resources.

The data that skeptics and investors alike are probably most eager to see is from a well that GasFrac fracked in north central Pennsylvania for Dallas-based Exco Resources. It could give a glimpse of how effective LPG fracking might be in Tioga County, which is also part of the Marcellus.

Meanwhile, GasFrac continues to expand its operation.

When InsideClimate News interviewed Letz last fall, he said GasFrac had a backlog of work and just two crews to handle it. Today the company has six crews in Canada and three in the United States. Letz said it aims to add another crew by June.

Michael Mazar, a financial analyst who follows GasFrac for BMO Capital Markets, thinks long-term trend leans in GasFrac's favor.

"I think most investors and analysts believe there is a large niche and GasFrac will be profitable," Mazar said. "More importantly, customers who use [LPG] find the technology works in terms of improving production rates."

In the end, it will be LPG's profitability that matters most to investors, Mazar said. "The environmental benefits are secondary."

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