1. Developing U.S. Shale Gas and Oil Resources: Problems and Prospects for the Next Decade Peter D. Blair, Executive Director NRC Division on Engineering & Physical Sciences 1

2. 2 Schematic geology of natural gas resources

3. “Fracking”―more than hydraulic fracturing Informally refers to a combination of technologies and drilling practices that comprise a well stimulation process used to facilitate extraction of substantial oil, gas, or geothermal resources that were largely considered inaccessible using conventional drilling techniques prior to about 2010. The prospects of its use to expand U.S. gas and oil production is potentially “game changing” because the size of known unconventional resource in the United States that may become economical by its use is so large. 3

4. 4 Hydraulic Fracturing

5. Fracking Process—Basic Steps to Resource Production: Drilling Phase Drilling horizontal well Fresh water protection Directional drilling at the shale layer, minimizing surface footprint Jet perforation: holes punched through well bore Clearing well bore to prepare for hydraulic fracturing 5

6. Fracking Process—Basic Steps to Resource Production: Fracking Phase Insertion of hydraulic fracturing fluids Continual pumping to increase pressure Injection of water, sand, and gelling additives Back flushing—pump out waste water for disposal or re-use Gas flow—fractured resource into well bore Production—often thousands of cubic meters of gas per day for 20-40 years 6

7. 7 Directional drilling and hydraulic fracturing combine to enable maximum natural gas field production from a minimal surface footprint.

8. 8 Shale Gas Basins in the United States

9. Role of Shale Gas in U.S. Natural Gas Supply 9

10. Shale gas production in areas across the U.S. 10 Source: EIA

11. U.S. Conventional vs. Unconventional Gas Resources: Natural Gas Production by Source, 1990-2040 (trillion cubic feet) 11

12. Considerable Uncertainty Remains in U.S. Natural Gas Supply Estimates 12

13. The Unique Favorable U.S. Circumstances Advanced technology availability with continuing advancement Considerable accumulated experience in enhanced oil recovery Abundant attractive resources for application of the technology Energy Policy Act of 2005 exempted shale gas operations from requirements of the Safe Drinking Water Act (SDWA). Growing demand for gas as an alternative to coal and nuclear fired electric power generation as well as in industry and perhaps even in transportation Well developed gas transmission infrastructure and sufficiently competitive natural gas prices to encourage development Currently favorable incentives for mineral rights holders to develop resources relative to other nations 13

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15. Issues and Uncertainties geographic differences in the geology of shale formations water consumption water pollution induced seismicity local development disruption waste disposal (fracking fluids) radioactive contaminants methane leaks flowback risks hydrogen sulfide exemption from the CWA puts the burden of environmental and some degree of economic regulation on states, which have considerable differences in their approaches with some very mature, such as Colorado, and other just now getting organized, such as New York. 15

16. 16 Global Potential Shale Resource Plays

17. World “Technically Recoverable” Shale Gas and Oil Reserves 17 Source: EIA, 2013

18. Shale gas development in U.S. dominates 18

19. Commonly Used Chemicals in Hydraulic Fracturing

20. Annual change in U.S. natural gas reserves, 2007-2011 20

21. U.S. Natural Gas Proved Reserves, 1981-2011 21

22. Estimates is U.S. Gas Supply 22 Source: Potential Gas Committee using 2010 consumption estimates (24 tcf/yr)