MAKING A VIRTUE OF BEING LATE
August 12, 2011 § 2 Comments
This statement has the makings of an oxymoron. In many settings it certainly is. So, for example there can be no discernible virtue of being late for your own nuptials. Being late for one’s own funeral, if that could be pulled off, has decided good points.
Being late is not precisely the same as coming in second. Nobody knows that Tom Bourdillon and Charles Evans were within 300 feet of the summit of
Everest three days before the second team of Edmund Hillary and Tenzing Norgay got to the top. Bourdillon and Evans likely did not even make it into Trivial Pursuit.
In the business of innovation there is a body of literature on the value of being first. “First mover advantage” is firmly in the business lexicon. But so is the “fast follower” principle. Indubitably, fast followers could be faced with patents preventing that from happening. Intel went out in front early and was never materially threatened. But many businesses have been built on the premise of letting somebody else build the market and make the mistakes. There is that old adage: the people in the front get shot.
So, what does all of this have to do with energy? The history of development of shale gas is instructive. After the realization that horizontal wells and fracturing enabled gas production from these tight rocks, the early attempts employed methods previously used. In particular, those involved in using sugars as thickening agents to easily fracture the rock. The sugar residue impaired production. Newer techniques, in areas such as in the Marcellus, use “slick water”. The results have been dramatic, albeit at the expense of higher volumes of water.
All of the foregoing is just plain building on the experience of the past. This post on the virtue of being late keys on the point that if fate has dealt you a hand that causes you to be late to the party, find ways to make that a positive. This is the opportunity presented to the areas of the east coast that have not yet materially been swept up by the shale gale. These include Ohio, West Virginia, Maryland and North Carolina. These states must institute measures whereby the exploitation of the resource is done in an environmentally sound fashion while still maximizing the realization of economic value for the communities affected.
The important measures required fall in the following categories:
- Ensuring that the water related issues are dealt with from the start. The foremost is the requirement to re-use all the fracturing water, because improper discharge has plagued parts of Pennsylvania. Fresh water usage must be replaced, over time, by saline water. This is technically feasible and simply needs execution. Water wells proximal to intended drilling should be tested prior to drilling and then routinely thereafter. The cost of this must be borne by the operator. Chemicals used must be publicly disclosed with very few exceptions, and even in those cases, full disclosure must be made to the authorities. The use of toxic chemicals such as the BTEX family and diesel in the fracturing fluid is technically unnecessary and should be expressly disallowed.
- The latest technologies to minimize environmental impact should be employed. These include the use of pad drilling to minimize road traffic and measures to prevent fugitive methane emissions. Enabling rule-making, such as unitization schemes to allow pad drilling and mandatory sensing for emissions and indications of casing leakage, must be instituted.
- A significant fraction of royalties collected should be ploughed back into giving relief to the affected communities. This includes hardening of farm roads unsuited to the heavy vehicles associated with the exploitation, and the water handling infrastructure.
- The public must be educated on all the issues and opportunities for dialog should be created. A clearing house of information is needed for affected parties such as potential land leasers and homeowners proximal to production activity.
The Secretary of Energy commissioned a study whose findings have just been published for public comment. This is a balanced report with a very positive attitude that is in keeping with the position we have been taking: shale gas is a game changer and it is incumbent on us to enable it responsibly. Produced in a scant 90 days, the report is necessarily short on some detail. But the message is clear and there is an air of optimism. For this it will undoubtedly be pilloried by some interest groups.