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Paradigm Shift: Hydraulic Fracturing, Shale Development and Energy Abundance
As is commonly held by energy sector experts, the game-changing development of the shales and the resurgence of natural gas as a virtually new, huge, versatile, long-term fuel, with a shrinking environmental footprint, is based upon the synergistic deployment of several key technologies. These key synergizing technologies include horizontal drilling, multi-well pad drilling, steerable drills and, foremost in the public’s mind, high-volume hydraulic fracturing, with the latter reduced in the public’s mind to “fracking” and then errantly applied to represent the entire shale development process. Therefore, in order to preserve this abundance, industry professionals and well-informed stakeholders, must persist in talking about hydraulic fracturing properly and insist upon it being accorded the respect it deserves.
 
Hydraulic fracturing, in tandem with other entrepreneurially driven disruptive technologies, has helped created a true paradigm shift, from energy scarcity to energy abundance in the United States. This newly found, technologically propelled abundance has been further fostered by the nexus of innovation, entrepreneurship and available capital. In order to optimize and extend this newly found energy abundance from domestic oil and natural shale development, it is imperative that hydraulic fracturing, with its ever-increasing efficiencies, be allowed to continue.
 
Another key aspect to keep in mind is the fact that the United States is almost singularly unique in allowing individuals, companies and non-profits, therefore entities other than the government or the sovereign, to own minerals. Private mineral ownership most often confers much needed strong pro-development support, provided good corporate citizenship is consistently practiced. Support for hydraulic fracturing is very important and mineral owners are a most compelling voice to bring to the ongoing discussions about shale development.
 
Hydraulic fracturing, especially under its most expansive definition, whether accurate or not, continues to be a very prominent part of media coverage about the oil and natural gas industry. Therefore it is critical to follow the coverage of hydraulic fracturing closely, which has included, among other subjects, recent coverage of alleged links to earthquakes, elevated radon levels and now a new study by Johns Hopkins University Bloomberg School of Public Health. The researchers at Johns Hopkins say they have found a link in the increase in premature births to a mother’s proximity to active, fracked natural gas wells. “Now that we know this is happening we’d like to figure out why,” said Brian Schwartz, lead researcher and a professor at the Johns Hopkins Bloomberg School of Public Health.
 
Professionals in the energy sector use the term hydraulic fracturing or “fracing”, an evolving technique which has been around for over 60 years, to denote a very specific part of the shale development process where the shale is fractured and the energy allowed to flow to the wellhead. However many others, including the mass media and especially those in opposition to shale development, use “fracking” and seek to have it understood as encompassing all aspects of shale development. The additional consonant in fracking better lends itself to a host of negative connotations, especially when those who oppose its deployment want all aspects of shale development to fall under their definition and spelling. Therefore, hydraulic fracturing will likely remain a focal point of shale development for the future.
 
Provided public policy remains supportive, capital available and innovation allowed to flourish, huge productivity gains remain to be realized in almost every energy sub-sector. This appears to be especially true for the unconventional shale plays, such as the Marcellus and Utica Shales. In fact, the development of unconventional shale oil and natural gas resources has proceeded so quickly and robustly in the United States in the past decade, it has created what the International Energy Agency ("IEA") has defined as an “energy renaissance.” The energy juggernaut of shale development, with its wide geographic distribution, has ushered the entire United States, and hopefully soon much of the world, into an era of energy abundance. This state of abundance, communicated through shale’s price signal, has imposed a strong downward pressure on energy prices, including coal, oil, natural gas and several renewables.
 
It is increasingly important to understand the concept of “Stacked Plays,” where multiple geological formations containing recoverable energy, are stacked one atop the other, sometimes with intervening intervals that are non-producing. This can maximize the energy produced from a shrinking footprint, thereby increasing our energy self-sufficiency and energy development productivity/efficiency, all while enhancing economic development, environmental quality and national security goals.
 
Many significant technological innovations have improved safety, lowered operating costs and reduced CO2 and other emissions, all while shrinking the environmental footprint of natural gas, oil and natural gas liquids ("NGLs"). These improvements have included reuse and recycling of flowback and produced water, reduction in pad size, particularly for stacked play development, and in logistical alignment of the upstream, midstream and downstream sub-sectors.
 
Hydraulic fracturing has been absolutely essential to development of the shale plays. It is commonly noted that over one million wells have been hydraulically fractured in the United States, with the further qualification that the great majority of these wells are conventional oil and gas wells. In order to understand the continuing technological developments in the Utica and Marcellus Shales, especially regarding the continued evolution of hydraulic fracturing, it is helpful to review some history.
 
Fracturing of gas and oil wells with liquid nitroglycerin began in the 1860s in several Appalachian States. “Modern hydraulic fracturing can be traced to an experimental fracturing treatment applied in Kansas’ Hugoton gas field in 1947 to a well operated by Stanoline Oil” (Beyond the Fracking Wars, pg. 246, American Bar Association, 2013). Stanoline worked with the Halliburton Oil Well Cementing Company and in 1945 performed the first two commercial slickwater fracturing treatments, which were the first predecessors to the ever evolving fracturing treatments used today.
 
The success of shale development has been in great part accomplished by building on the pioneering work in combining hydraulic fracturing and horizontal drilling in the Texas Barnett Shale Texas by George Mitchell, the legendary chairman and founder of Mitchell Energy. It took Mitchell’s great resolve, his indefatigable experimentation with different fracturing treatments, the availability of federal Section 29 tax credits, and a nation that had growing energy needs and concomitant environmental goals.
 
The Barnett Shale was the first shale gas formation that combined long lateral, horizontal wellbores, which were hydraulically fractured, producing wells in merchantable quantities. Somewhat in reflection of Thomas Edison’s relentless testing of different filaments until he hit upon a workable type, George Mitchell and his team tried many different completion recipes. In the Barnett, Mitchell Energy’s tenacity combined well with the horizontal drilling expertise of Devon Energy, (Devon ultimately bought Mitchell Energy), along with the “slickwater frac” technologies developed by Union Pacific Resources Corporation. Due to this unique combination of technologies and other synergies of the key players, the Barnett Shale became the largest natural gas field in the United States in less the ten years after development began.
 
The first commercial horizontal Marcellus well was drilled in Washington County, Pennsylvania by Range Resources in 2003, by which time Devon Energy had already bought Mitchell energy and along with several other independent shale players set out to fully develop the Barnett. Fast forward to 2015, and Pennsylvania went from producing 25 percent of its own natural gas use to producing 20 percent of the entire United States’ annual use.
 
In 2007, only 27 Marcellus Shale wells were drilled in Pennsylvania. However, in 2010 the number of wells drilled had risen to 1,386 with 1,370 drilled in a low price environment in 2014. Many of these wells will yield millions of cubic feet of natural gas per day in their first year. Ohio and West Virginia have been the beneficiaries of rapidly developing Marcellus and Utica Shales. Even back in 2012, there were 48,000 oil and gas wells drilled in the United States, with more than half being horizontal, and over 95 percent of the total number being hydraulically fractured.
 
What are the key factors that shall determine the continued increase in domestic production of oil, natural gas and NGLs, in addition to the continued refinement to the key technology of hydraulic fracturing and the continuation of positive public policy and support for shale gas development?
 
According to the April 2015, edition of the American Oil & Gas Reporter, “Next-generation pad drilling rigs, sophisticated subsystems, automation, and communications all have a bearing on the new metrics by which independent operators measure drilling efficiency.” Advanced analytical methods both downhole and on all manner of the inputs/outputs on the surface will be joined with a huge treasure trove of data from the many thousand horizontal shale wells that have been drilled and completed, in addition to a small but increasing number of early wells that have been “re-fraced.” A significant amount of historic well drilling, completion and production data, along with the increased amount and accuracy of new data placed inside long horizon research and analysis should help continue the increasing productivity of domestic shale production.

Energy Law Scott Rotruck
304.291.7973
srotruck@spilmanlaw.com