The global shale gas initiative: will the United States be the role model for the development of shale gas around the world?

• Author: Sakmar, Susan L.

1. INTRODUCTION II. OVERVIEW OF UNCONVENTIONAL GAS DEVELOPMENT AND TECHNOLOGY A. Types of Natural Gas Reservoirs B. Hydraulic Fracturing and Horizontal Drilling C. Hydraulic Fracturing Fluids III. SHALE GAS: THE GLOBAL ENERGY "GAME CHANGER" A. Shale Gas Development and Resources in the United States B. Shale Gas Development and Resources in Canada C. Shale Gas Development and Resources in the Rest of the World D. Challenges to Developing Global Unconventional Gas IV. THE GSGI: WILL THE UNITED STATES BE A MODEL FOR GLOBAL SHALE GAS DEVELOPMENT? V. ENVIRONMENTAL ISSUES ASSOCIATED WITH SHALE GAS DEVELOPMENT IN THE UNITED STATES A. Water Contamination Concerns B. Water Quantity and Flowback Concerns C. The EXXON/XTO Merger VI. REGULATORY FRAMEWORK FOR SHALE GAS DEVELOPMENT IN THE UNITED STATES A. The Safe Drinking Water Act B. Leaf v. EPA C. The FRAC Act D. EPA Study E. Other Congressional Actions: Disclosure of Frac Fluid Chemicals F. State Regulations and Actions Pending Potential Federal Action VII. CONCLUSION I. INTRODUCTION

   One of the most promising recent developments in the energy sector has been the dramatic increase in the production of natural gas from shale formations, or shale gas. (1) Although experts have known for years about the vast deposits of shale gas found throughout the world, technological difficulties and the high costs of producing shale gas made it impractical to consider as a serious energy source. (2) However, recent technological innovations combining hydraulic fracturing (also known as "fracing") and horizontal drilling technologies (3) have resulted in a tremendous increase in shale gas production in the United States over the past five years. (4) This boom seems likely to continue with leading energy experts proclaiming shale gas an energy "game changer" that will "revolutionize" global gas markets and help bridge the gap between conventional resources and the development of renewable energy sources. (5)

   Thus far, the United States has been the undisputed leader in unlocking the vast tracts of gas-bearing shale found throughout the lower forty-eight states, but Canada is also emerging as a potential major source of shale gas. (6) The so-called "shale gale," the strong wind blown by the technological advances in hydraulic fracturing and horizontal drilling, is not limited to North America. (7) Because shale formations exist in almost every region of the world, the potential for shale gas development is enormous and global in scope. (8)

   Because hydraulic fracturing is an essential part of developing global shale gas resources, (9) it is imperative that the industry ensures the process is safe and environmentally sound before it utilizes the technology in new areas of the world. (10) In the United States, numerous concerns have been raised about the potential environmental impacts of hydraulic fracturing, with a particular focus on the injection of hydraulic fracturing fluids in wells located near drinking water sources, (11) the quantity of water used in the process, and the disposal of waste or flowback water. (12) The U.S. response to these concerns will be closely watched around the world, and a well-crafted regulatory regime could serve as a model for foreign countries looking to responsibly develop their shale gas resources. (13)

   So far, Congress has introduced legislation known as the "FRAC Act" that, if passed, will place stricter regulations on the shale gas industry. (14) Additionally, in March of 2010, the U.S. Environmental Protection Agency (EPA) announced that it would conduct a comprehensive research study to investigate the potential adverse impacts that hydraulic fracturing may have on water quality and public health. (15) In the meantime, the hydraulic fracturing process continues to draw criticism from environmentalists. (16)

   Although the federal regulatory and EPA investigative process will take some time, the United States has nonetheless sought to take the lead in helping other countries find the right balance between energy security and environmental concerns through the Global Shale Gas Initiative (GSGI). (17) The United States launched the GSGI in April 2010 as part of an effort to "promote global energy security and climate security around the world." (18) Recognizing that shale gas has been a "terrific boon" that many countries would want to replicate, the GSGI seeks to share information about the "umbrella of laws and regulations" that exist in the United States. (19) This intricate set of federal and state laws and regulations helps ensure shale gas development is "done safely and efficiently." (20)

   To examine whether the GSGI will allow the United States to serve as a role model for the global shale industry, this Article addresses the legal, policy, and environmental challenges associated with shale gas development in the United States. Part I provides an overview of the types of unconventional gas resources, including a discussion of the hydraulic fracturing and horizontal drilling technology that is crucial to shale gas development. Part II highlights the prevailing view that shale gas is an "energy game changer" that could dramatically impact global energy supplies, energy security, climate change mitigation, and geopolitics. This section also provides an overview of the major shale gas basins in the United States and Canada and a brief discussion of the potential shale gas reserves in the rest of the world.

   Part III discusses the GSGI as well as other U.S. efforts and initiatives to help countries around the world develop their own shale gas resources. Part IV addresses the various environmental concerns that have been raised related to the development of shale gas in the United States. Part V discusses the federal and state laws and regulations affecting shale gas development in the United States, including an analysis of proposed legislation to further regulate the industry and a recent EPA study into the potential impact of hydraulic fracturing on drinking water sources and other environmental effects.

   Finally, Part VI concludes that a careful analysis of the legal, policy, and environmental challenges associated with global shale gas development needs to be done before the full potential of this game-changing resource can be realized. With the exploration of shale gas resources being undertaken on nearly every continent, will the United States lead the way as a role model for environmental best practices in other countries? Though it may be too soon to tell, it is certainly a development worth watching.

2. OVERVIEW OF UNCONVENTIONAL GAS DEVELOPMENT AND TECHNOLOGY

   A basic understanding of the different types of gas reservoirs is helpful in order to appreciate the difficulties involved in extracting natural gas from certain types of reservoirs.

   1. Types of Natural Gas Reservoirs In general, gas reservoirs are classified as conventional or unconventional based on the following: (21)

      Conventional reservoirs: In a conventional reservoir, natural gas has migrated from a source rock into a "trap" that is capped by an impermeable layer of rock. (22) Conventional gas reservoirs are often associated with deposits of oil and are often developed in conjunction with oil. (23) In conventional gas reservoirs, a traditional well may simply be drilled directly into the reservoir. (24) Because the sands or rock that contain the gas have interconnected pore spaces, and are thus permeable in nature, the gas flows naturally to the wellbore. (25)

      Unconventional reservoirs: In an unconventional reservoir, natural gas must be extracted from the source rock itself using a variety of production techniques including hydraulic fracturing and horizontal drilling. (26) Because of the low permeability of unconventional reservoirs, these techniques are used to stimulate the reservoir--by creating fissures in the rock, the gas flows more easily through it, enhancing production. (27) There are three types of unconventional gas reservoirs:

      1. Tight Gas: Tight gas commonly refers to natural gas that is trapped in sandstones, and it accounts for approximately 30% of current U.S. natural gas production. (28)

      2. Coal Bed Methane (CBM): CBM is natural gas that is produced from coal seams, which act as the source and reservoir for the natural gas. (29) CBM has been produced commercially since the 1980s and today accounts for approximately 8% of total U.S. natural gas supply. (30)

      3. Shale Gas: "Shale gas is natural gas produced from shale formations that typically function as both the reservoir and source for the natural gas." (31) The economic potential of a particular shale formation can be evaluated by indentifying specific source rock characteristics. (32) These characteristics are used to predict whether marketable volumes will be produced from the formation. (33) A number of wells may need to be drilled and analyzed in order to sufficiently determine the potential of the shale formation, especially if the basin is large and the targeted zones varied. (34) This article focuses on shale gas as opposed to the other two types of unconventional gas because of the significant growth in shale gas production in recent years.

   2. Hydraulic Fracturing and Horizontal Drilling

      The primary method of natural gas extraction from unconventional sources involves the combination of two production technologies--hydraulic fracturing and horizontal drilling. (35) Although these two technologies have been around for decades, the combination of the two, coupled with technological advances in equipment and cost reductions, was the key to unlocking the vast reserves of shale gas in North America. (36)

      Hydraulic fracturing involves the high-pressure injection of fluids into a natural gas formation to create fissures in the rock. (37) This process allows the natural gas to move freely from the rock pores so it can be pumped to the surface. (38) Horizontal drilling has been instrumental in...