1. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 1 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” Michael L. Godec, Vice President ADVANCED RESOURCES INTERNATIONAL, INC. Arlington, VA Seminar of the National Institute for Energy Ethics and Society (NIEES) Arizona State University Tempe, AZ April 10, 2013

2. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 2 Disclaimer The views and opinions expressed in this presentation do not necessarily reflect those of Advanced Resources, or any of its clients -- past, present, and/or future. In fact, some of the views and opinions expressed in this presentation by the presenter may not necessarily reflect those of the presenter.

3. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 3 Topics for this Presentation Shales: What’s the big deal? What is “Fracking”? What are really the important considerations -- can we distinguish mythology from facts? What are the ethical implications of policy alternatives?

4. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 4 Shale Gas and Tight Oil What are we talking about? Shale -- a fine-grained, sedimentary rock characterized by breaks along thin laminae or parallel layering or bedding, with low porosity and permeability Shale gas -- natural gas found trapped within shale formations Tight oil (also known as liquids-rich shales) -- light crude oil contained in shales Important facts: –The permeability of shales is very low – several orders of magnitude lower that construction-grade cement –Tight oil development uses the same technology as that contributing to the recent shale gas boom. –Without stimulation, most shales would not be economic to produce

5. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 5 Shales: What’s the Big Deal? “Shale Gas is the most important energy development since the discovery of oil” Fred Julander, CEO of Julander Energy “Mission Critical: Can Shale Gas Save the World?” ASPO, September 21, 2009 "Ample supplies, robust emerging markets and uncertainty about nuclear power all point to a prominent role for gas in [the] global energy mix." International Energy Agency, World Energy Outlook 2011 “The United States may be close to self-sufficiency in energy by 2030 because of a "shale revolution" in the country.” BP CEO Bob Dudley, January 17, 2013 “U.S. crude oil production on track to surpass imports for first time since 1995” Energy Information Administration, March 2013 Short-Term Energy Outlook.

6. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 6 Shales: What’s the Big Deal?

7. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT U.S. Shale Production Forecast to Dramatically Increase, Resulting in Lower in Natural Gas Prices 7 Source: EIA (http://www.eia.gov/forecasts/aeo/er/executive_summary.cfm)http://www.eia.gov/forecasts/aeo/er/executive_summary.cfm

8. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT Shales: What’s the Big Deal? International Energy Agency Projections 8 Source: Source: International Energy Agency, Golden Rules for a Golden Age of Gas: World Energy Outlook, Special Report on Unconventional Gas, OECD/IEA, May 29, 2012

9. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 9

10. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 10 What Changed the Game? Horizontal Well with Multi-Stage Fracturing Source: EnCana Natural gas production from shallow, fractured shale formations not new  First shale well drilled in Fredonia, NY in 1821  First fractured well in 1947  2.5 million fractures to date worldwide; > 1 million in U.S. What “changed the game” was the recognition that one could “create a permeable reservoir” and high rates of gas production by using intensively stimulated horizontal wells

11. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 11 Distance between shale formation and ground water typically > 1 mile Vertical fractures rarely grow more than about 300 feet, and are usually much less

12. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 12 “Fracking” – Bridging a Language Barrier Industry defines “fracking” narrowly, to only include the days worth of activity stimulating the well Opponents define it to include the entire process of shale oil and gas development – from well site identification to production well abandonment This semantic difference has contributed to many misunderstandings between different stakeholders o Most cited environmental concerns had nothing to do with industry’s definition of “fracking” operations The characterization of “fracking” sets the terms of the discussion and debate.

13. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 13 Source: http://warrenpohatu.blogspot.com/2011/12/what-is-fracking-cuz.htmlhttp://warrenpohatu.blogspot.com/2011/12/what-is-fracking-cuz.html What Is “Fracking”?

14. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 14 Source: http://christinacoleman.org/gasland/what-is-frackinghttp://christinacoleman.org/gasland/what-is-fracking What Is “Fracking”?

15. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 15 Source: http://www.cwfnc.org/what-we-do/hydraulic-fracturing/about//http://www.cwfnc.org/what-we-do/hydraulic-fracturing/about// What Is “Fracking”?

16. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 16 Sorting Fact from Fiction? Environmental impacts/benefits of greater natural gas production Adequacy of regulatory oversight? Impacts on economy and energy security? Environmental impacts – real or not? −Ground water contamination −Water use and disposal −Chemical handling and reporting −Air quality −Induced seismicity −Others

17. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 17 Natural Gas Still Emits GHGs, though < Coal/Oil; Could Displace Renewables as Low-Cost Power Alternative Cost of producing energy before subsidies, per megawatt hour. Bloomberg New Energy Finance, 3rd quarter 2009.

18. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 18 U.S. CO 2 Emissions at 20-Year Low Declining CO 2 emissions not due to wind or solar power Primary reason is availability of low-cost gas −Due primarily to shale gas development −Gas displacing coal as fuel for power generation

19. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 19 Natural Gas Believed to Play Critical Role in Reducing Global Emissions of GHGs

20. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 20 Is “Fracking” an “Unregulated” Activity? One side – Oil & gas industry exemptions (“loopholes”) from federal environmental statutes allows “fracking” to be “unregulated” Other side – Exemptions were provided based on conclusions that oil and gas adequately addressed under state regulations −States were regulating oil and gas activities long before such activities were even considered by federal statutes −“One size fits all” federal regulations inappropriate given diversity of geology, environment, etc. among states −Unlike industrial facilities, oil and gas facilities tend to be small and disperse, minimizing local impacts −No need for regulatory duplication between states and feds Nature and extent of current level of activity and sophistication of the technology not foreseen by pre-2008 laws and regulations

21. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 21 Adequacy of State Regulations Within the last several years, every state has introduced new legislation and/or regulations imposing stiffer requirements – in recognition of dramatic growth in activity Under Congressional directive, EPA undertaking comprehensive study of the impacts of hydraulic fracturing −A state regulatory review is part of this assessment EPA is also looking at other statutory/regulatory mechanisms to address issues of concern Nonetheless, several states have imposed bans or moratoria on fracturing in place (NY, VT, NJ) Only NY is thought to have significant potential −Numerous cities/towns have also issued bans or moratoria; many are being challenged as a violation of state law −Most moratoria driven by need for better understanding of impacts

22. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 22 Source: http://chemistrytoenergy.com/shale-gashttp://chemistrytoenergy.com/shale-gas Economic Implications of “Fracking”

23. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 23

24. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 24 Are Ground Water Resources Safe? Source: http://mnprogressiveproject.com/minnesota- needs-to-do-its-part-to-end-fracking/

25. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 25 Are Ground Water Resources Safe? One side – “Fracking” poses substantial risk to ground water resources o Several researchers have claimed that low ground water quality in some areas is linked to “fracking” Other side -- In some cases where contamination was claimed, activities other than “fracking” likely the cause o Sometimes cause is normal oil and gas operations, not unique to “fracking” o Activities regulated and enforced under existing authorities o “Contamination” often existed before oil and gas development o Methane can come from biogenic sources, coal seams, other non- targeted formations o Background analyses rare to determine water quality before development began

26. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 26 Are Ground Water Resources Safe? Source: www.energyindepth.com

27. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 27 Are Ground Water Resources Safe? EPA conducted high visibility investigations of alleged ground water contamination in 3 locations (TX, WY, and PA) o In all cases, investigations were suspended or no conclusive evidence of contamination from oil and gas operations found EPA has is performing case study assessments as part of its Study of the Potential Impacts of Hydraulic Fracturing on Drinking Water Resources o Prospective case studies, where research at the site begins before hydraulic fracturing occurs, and then continues during and after hydraulic fracturing activities. o Five retrospective case studies at sites where hydraulic fracturing has already occurred, and where contamination of drinking water resources has been reported.

28. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 28 What about Surface Water? http://www.watershedcouncil.org/learn/h ydraulic-fracturing/concerns-tieh- hydraulic-fracturing/ Concerns exist about the source of the water pre-fracking and disposition of waste water post-fracking Contamination from surface water management probably bigger threat than “fracking’ Used by a Texas golf course every eight days during the summer. Needed to irrigate enough cornfields to produce 5,100 gallons of ethanol. Used annually for outdoor watering by 90 typical American households. – Used by New York City every six minutes. About 4 million gallons required to frack a well, roughly equal to the amount:

29. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 29 What about Surface Water?

30. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 30 What about Surface Water? Many Operators Now Treating and Reusing Frack Water Flow Back http://www.environmentalleader.com/2012/05/14 /stricter-regulatory-standards-end-of-legal- loopholes-needed-for-fracking-safety-nrdc-says/

31. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 31 What about Air Quality? One side – Natural gas development emits methane, volatile organic compounds, hazardous air pollutants, and GHGs −Methane has 25 times more impact on warming than CO 2 −Few claim life cycle GHG emissions from power generation with gas supplied from shales greater than associated with coal power generation Other side -- Emissions from natural gas power generation are half of that of coal −New EPA proposed NSPS for GHG emissions from power generation are essentially based on this Fact – sources of data to support either side’s claims are insufficient – more data are needed! −Data being collected as part of EPA’s Mandatory Greenhouse Gas Reporting Rule should help clarify and inform Recent World Resources Institute study concludes that methane leakage rates need to be below 1% for life cycle climate impacts of gas to be less than coal

32. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 32 Why Can’t We Know What is Being Put in the Ground? One side – Communities have a “right to know” what “toxic chemicals” are being used in fracture stimulations Other side – Revealing chemical compositions of fracture fluid formulations reveal valuable corporate trade secrets Fact – Most states require reporting of chemicals used in fracturing to state regulatory agencies and emergency response authorities −But requirements on how its reported, and how proprietary information is protected vary considerably from state-to-state Fact -- Industry is developing less toxic alternatives to critical chemicals

33. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 33 Some Chemicals Used in “Fracking”

34. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 34 More Environmentally Benign Fracture Fluid Additives are Being Developed To minimize environmental risks, the BJ SmartCare family of fracturing fluids and additives uses quantifiable and standardized chemical evaluations to assess products and identify possible alternatives. Photo at left courtesy of Baker Hughes Source: Halliburton

35. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 35 What about the Threat of Earthquakes? Some researchers are demonstrating the frequency and intensity of small earthquakes is increasing in areas of expanding shale gas development −Though establishing an undisputable linkage for causation has proven illusive The National Research Council that concluded “hydraulic fracturing a well as presently implemented for shale gas recovery does not pose a high risk for inducing felt seismic events.” Instead, the researchers found — like the USGS did a few months ago — that injection wells were more commonly the culprit for induced seismicity

36. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 36 What about Other “Quality of Life” Considerations?

37. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 37 Can These New Natural Gas Resources Be Developed In An Environmentally Sound Way? Assuring Safe Hydraulic Fractures Drilling Appropriately Constructed Wells Reducing Land Use/Social Impacts Recycling Water and Reducing Water Use Appropriately Siting Disposal Wells Controlling/Capturing Methane Emissions Numerous efforts underway to establish multi-stakeholder developed guidance and best practices Improved approaches for pursuing this resource are available, without imposing unnecessary costs.

38. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 38 Examples of Efforts Focused on Best Practices American Petroleum Institute “HF series” of best practices guidance documents for hydraulic fracturing Marcellus Shale Coalition Barnett Shale Energy Education Council Appalachian Shale Water Conservation and Management Committee Individual corporate Statements of Principles STRONGER state regulatory reviews Secretary of Energy Advisory Board recommendations National Petroleum Council recommendations World Resources Institute recommendations

39. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 39 Center for Sustainable Shale Development CSSD -- independent organization with mission to support continuous improvement and innovative practices through performance standards and third-party certification. CCSD provides a forum for diverse stakeholders to share expertise with common objective of developing solutions/ serving as center of excellence for shale gas development CCSD is collaborative effort of environmental NGOs, philanthropic foundations, O&G companies and others CCSD prepared to offer “seal of approval” to companies meeting established performance standards Note – not all environmental groups or O&G companies are supportive of this effort See http://www.sustainableshale.org/http://www.sustainableshale.org/

40. April 5, 2013 What the Frack?: Making Sense (Maybe?) of the Technology, Ethics and Politics of “Fracking” JAF2013_023.PPT 40Conclusions Sorting fact from fiction in the shale gas debate is difficult o This difficulty poses dilemmas for policy- makers and regulators Conflicting environmental objectives complicate transparency and rational assessment o Reduce fossil fuel dependency at all costs vs. o Developing sound sustainable approaches to shale resource development Ethical issues abound between and among critical considerations Individual values can play a critical role in where one stands on this issue o And how they perceive the “facts”