May 03

 

There is no need for more environmental legislation in the case of shale gas exploration, at least until it reaches commercial scale, says a new study published by the European commission.

The activities relating to exploration of shale gas are already subject to EU and national laws and regulations, says the report, carried out for the European commission by Belgian law firm Philippe & Partners.

Water protection issues, for instance, which have been raised as an issue by shale gas detractors, are already covered by EU legislation under the Water Framework Directive, the Groundwater Directive and the Mining Waste Directive. Meanwhile, the use of chemicals is covered by the REACH regulation, the study says.

“It is a new technology and we do not have a specific legislation on shale gas, because it is so new,” said Marlene Holzner, European commission spokesperson on energy.

“So the study only says that the existing regulations are applicable for shale gas, that the tool is there and has only to be applied,” she told EurActiv, adding that the study was carried out only in four countries – Poland, France, Germany and Sweden. It was released on 27 January.

The law firm said shale gas activities were too small at the moment to justify specific legislation. “Neither on the European level nor on the national level have we noticed significant gaps in the current legislative framework, when it comes to regulating the current level of shale gas activities,” the study says.

This is, however, not a reason for “complacency”, the study says, since the assessment refers only to the current scale of operations in Europe. Shale gas exploitation on a commercial scale would involve bigger maneuvers, it adds.

Europe has less experience in exploring shale gas formations as a new source of natural gas and no commercial scale exploitations have taken place yet, but this “is expected in a few years’ time”, the report says.

Shale gas is an unconventional source of natural gas and studies show different results on how safe the two main methods of extracting it from rock formations.

One is the horizontal drilling in various regions of the rock, which is needed to capture the gas pockets. The other, hydraulic fracturing – or ‘fracking’ – involves a high-pressure injunction of fluids usually mixed with chemicals into shale rock. Both of them require seismic and drilling permits, as well as large amounts of chemicals and water.

Only after conducting consecutive tests for drilling and fracturing does a project reach the stage of planning and acquiring the needed pipeline, followed by the decision to bring the extraction to a commercial scale.

In a few years’ time, investors might find themselves in need of making a decision on the commercial development of their shale gas projects, a situation which is not covered by the EU study published on 27 January.

Poland, which aims to shrug off its dependency on Russian gas, is planning to begin commercial shale gas production from 2014, Prime Minister Donald Tusk said last year. Most of the projects are currently at the phase of seismic surveys and some projects already have entered the drilling phase, which is expected to intensify after 2014.

The natural gas trapped in shale rock in Poland could provide the country with enough fuel to last for 300 years, the US Department of Energy said last year.

However, not everyone is willing to allow drilling operations on their land, despite the economic potential. At the beginning of January, thousands of Bulgarians protested against exploration for shale gas over fears it could poison underground water, trigger earthquakes and pose serious public health hazards.

Source: The Guardian
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Mar 28

 

The price of natural gas is at record lows thanks to a shale drilling boom, giving it added credibility as an alternative energy source in the United States, with automakers jumping on the bandwagon.

Mark Hanson, an analyst at investment research firm Morningstar, said the use of natural gas instead of oil-based gasoline to drive the country’s cars and trucks “is definitely starting to take off”.

“The economics seem to work,” he said, noting it was “just a question of what pace” the necessary infrastructure will take to develop.

David Cole, chairman emeritus of the Centre for Automotive Research, said gas was in focus as a potential engine fuel because “it is tremendously good fuel”.

Unlike petrol, whose rising prices are causing pain at the pump for consumers, natural gas is cheap in the United States as supplies bulge from production in the country’s vast shale gas formations.

In addition, natural gas less carbon dioxide than petrol when burned. Thus, it is considered a “green” fuel even though in its raw state, the methane it emits is more destructive to the Earth’s ozone layer than CO2, and the artificial fracturing of gas shales, known as “fracking,” has drawn fire from environmentalists.

Compressed natural gas (CNG) is pressurised gas stored in a similar way to a vehicle’s petrol tank.

Liquefied natural gas (LNG) is produced by chilling natural gas to about minus 160 degrees. It can be used as engine fuel for heavy ground or maritime vehicles.

In Europe, the fuel of choice for cars is liquefied petroleum gas, typically a mixture of butane and propane made from refined crude oil or natural gas.

Meanwhile, the three major US automakers are pumping out vehicles based on alternative fuels.

Ford has the largest array of alternative-energy vehicles: eight powered by natural gas, while the smallest US carmaker, Fiat-controlled Chrysler, early in March unveiled a pick-up truck than can use liquefied natural gas, which will go on sale in June.

Sergio Marchionne, the chief executive of Fiat and Chrysler, views natural gas as having greater potential than electricity to power vehicles.

General Motors, the US giant at the top of the global auto industry, produces two vans that use compressed natural gas, the Chevy Express and the GMC Savana, and will begin production by the end of the year on two pick-up trucks running on CNG.

It’s working on a number of different alternative fuels, and particularly on electric vehicles, but GM spokesman, Dan Flores, said: “We think compressed natural gas offers a lot of potential. The technology is promising.”

It is particularly appealing to businesses, especially service providers such as telecoms, package deliverers like UPS, or to local governments, which operate trash removal or emergency vehicle fleets.

CNG vehicles operate at relatively short distances from a refueling hub. The economies of scale for a large business or public body can potentially justify the cost of an investment in the specialised refueling equipment.

For individual consumers, the refueling infrastructure is limited. And compressed or liquefied gas is expensive and requires substantial storage capacity, restricting the vehicles’ range.

Morningstar’s Hanson said that there were only about 400 CNG stations in the US.

In Europe, natural gas also is sparking interest amid rising gasoline prices, but so far it remains only a small portion of the market.

In France, for example, it represents less than one percent of the vehicle fuel consumed and only 200 000 of the country’s 31 million privately-owned vehicles run on liquefied petroleum gas.

Source: The Independent Online

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Feb 16

 

Registered investment advisor Simon Lack writes in Business Advisor on demand for shale gas: 

Two articles concerning shale gas have caught my attention this morning. “The Death of Coal” reflects the view of some that under current EPA policies coal will continue to lose ground to natural gas as the fuel of choice for electricity generation. Cheap and relatively clean natural gas is eating into the demand for coal and EPA regulations on some of the more harmful pollutants released by burning coal are adding fuel to the fire.

Abundant and cheap natural gas has certainly pressured the stock prices of some E&P names recently, but low prices will create their own demand.

Another piece from UBS makes the case that as the U.S. reaches energy independence this will increasingly provide support for the US$. The U.S. has been an importer of crude oil for as long as any of us can remember (currently estimated at $300BN), but that is changing as new domestic discoveries are reducing the need for imports.

The revolution in shale gas as well as new discoveries of oil (North Dakota now produces more oil than OPEC member Ecuador). This will eventually reduce the drag on our trade deficit of being an energy importer, and could well be supportive for the US$. Over time it will reduce U.S. reliance on the Middle East, and by reducing global trade imbalances could slow the growth of sovereign wealth funds.

Devon Energy (DVN) is squarely in the middle of this. We also continue to like being long US$ versus the Euro. Short the Euro is a nice form of tail risk insurance. While a Greek default is still unlikely, some European finance ministers are reportedly more sanguine at that prospect should Athens fail to sign up to the latest austerity plan. Neither outcome makes the Euro attractive.
Source: Business Insider

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Feb 07

 

US major ExxonMobil will continue its shale search in Germany alongside conventional gas exploration efforts, the company’s head of Central European operations, Gernot Kalkoffen has said.

“(Germany) is most definitely an interesting market,” Mr. Kalkoffen as said in an interview with Handelsblatt business daily. “We cannot achieve the energy strategy shift without gas.”

Nine companies including Exxon, have secured options to search for natural gas in the province of North Rhine-Westphalia, which is suspected to host 2.1 TCF of natural gas.

The company would be targeting both conventional and unconventional gas resources, Kalkoffen told the paper, using a range of technologies including hydraulic fracturing for shale gas.

Exxon has made test drillings both for shale gas and for coal bed methane.

Currently, Mr. Kalkoffen said, ExxonMobil is waiting for the results of research into the effects of hydraulic fracturing on groundwater. Even so, he said, it was not entirely certain that the company would need to frack for shale, with a 50 per cent chance that the method would not be used.

Kalkofen pointed to the significant economic benefits the state would reap interms of royalties, municipal taxes and new employment.

Germany remains hesitant about the use of hydraulic fracturing and the environmental risks posed.

In March of last year, North-Rhine Westphalia imposed a moratorium on shale gas extraction, asking ExxonMobil to suspend its fracking operations in the region, which had begun in 2008, until expert opinion could be collated into the potential environmental impacts of hydraulic fracturing.

Source: Natural Gas for Europe

 

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Jan 25

 

Wednesday, January 25th, 2012

San Leon Energy Plc (AIM:SLE) (“San Leon” or the “Company”) is pleased to announce that it has completed the acquisition of more than 2,280 km of 2D seismic across its Tarfaya and Zag Licenses onshore Morocco. The data was acquired by San Leon Energy’s wholly owned subsidiary, NovaSeis.

608 line km of high density 2D seismic data was acquired on the northern portion of the San Leon operated Tarfaya License across the J North prospect. This adds to the existing 2,289 line km of existing 2D seismic across the license. The Netherland, Sewell & Associates 2008 CPR placed 156 million barrels of recoverable prospective oil resources in the J North prospect with upside potential of more than half a billion barrels. In total San Leon currently has 12 leads and prospects across the Tarfaya license with net prospective resources of 711 million barrels of oil equivalent based on the Netherland, Sewell & Associates 2008 CPR. Several new adjacent leads have also been identified around J North as a result of the new 2D seismic data.

The new seismic data quality is significantly improved compared to previous 2D seismic data in the area as a result of longer offsets and higher density acquisition. The new data is currently being processed and interpreted by the Company in its Warsaw office.

1,674 km of 2D seismic data was acquired across the San Leon operated Zag License in Morocco (greater than 5 million acres). This is the first seismic data ever acquired across the Zag License. The combined Zag Basin aeromagnetic survey acquired in 2009 by San Leon and the adjacent license to the north was the basis for the layout of the 2D program. The Company is focusing on the Zag license for both conventional and unconventional oil and gas potential. The unconventional gas potential is primarily within the Silurian interval, whilst the conventional oil and gas potential is in the Ordovician and Devonian intervals.

The Company will continue integrating the new seismic results into its existing basin model in preparation for opening a data room to seek partners for the exploration drilling phase. Any future exploration activities in the Southern provinces will, as they have been to date, be in accordance with international law.

NovaSeis (“the Crew”) was established by San Leon to acquire its onshore seismic data at lower cost with the flexibility to optimise acquisition parameters in difficult data areas. The Crew currently has 1,200 channels of Geospace Technologies (subsidiary of OYO Geospace) cableless GSRs with five Sercel NOMAD vibrators. The Company plans continued investment into NovaSeis to expand its capabilities to 3D acquisition this year as part of upcoming seismic acquisition programs in Poland. While NovaSeis was created to serve the needs of the San Leon Energy group, it is also available to acquire revenue-generating projects outside the Company.

Oisin Fanning, Chairman of San Leon, commented:

“We view Morocco as a long term project for the Company with significant upside over a huge unexplored area. The excitement of the potential of Morocco is based upon the significant production in the same basin in Algeria as well as the huge potential for a Silurian shale gas play. The completion of our seismic program is the next step in bringing our projects closer to drilling.

I am also very pleased with our investment in NovaSeis which has helped us acquire high quality, low cost seismic and given us the flexibility to acquire more data per line km than we could have using a more conventional cable acquisition system. The next step for NovaSeis is to return to Poland where the wireless system will make a real impact by significantly reducing the surface impacts of seismic acquisition while giving us the flexibility to acquire data in areas that a traditional system would not be possible.”

Source: San Leon Energy

 

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Jan 12

 

Natural Gas for Europe tells us all about a research institute where unconventional gas is nothing new:

While unconventional gas was below the radar until the last several years in the United States, one research institute there has been working on the topic for decades.

According to Trevor Smith, Program Manager in Unconventional Gas Sustainability, the Gas Technology Institute (GTI) had been working on unconventional gas development for the last 30 years, and that included coal bed methane and shale gas studies. He told delegates in attendance at the European Autumn Natural Gas Conference in Paris, France of the Institute’s experience with unconventional gas.

He explained that GTI, which was based in Chicago, had 250 staff, and was the only not for profit in the US focused solely on natural gas.

“Although the technology has been developing for over 30 years, the stakeholders have only known about it for a short time. Society’s reaction so far has been mixed,” he explained. “A harsh spotlight has been based on the industry’s practices.”

“Industry knows the technologies are proven,” he contended. “For those outside the industry, technologies appear new, novel, dangerous, untested.”

Mr. Smith said it was necessary to separate the facts from fiction regarding the technologies – hydraulic fracturing and horizontal drilling – in Europe.

“This has occurred because of a significant vacuum,” he said of the public’s misconceptions. “There is little information about the science behind the technology. In the absence of good information, some people have formed their own conclusion.

“More difficult to change people’s beliefs after the fact,” he added.

He noted that instead of talking rationally with other groups, those protesting against unconventional gas “climbed up on ladders and shouted their judgments.”

“It’s as much about the science of human behavior as it is about unconventional gas technology,” explained Smith, who touched upon the environmental issues, real and perceived.

He said: “Water is obviously at the core of the environmental debate. Greenhouse gasses are at the forefront of people’s minds when they think about shale gas.”

His presentation showed a typical well site in the US, a farmer’s backyard in Arkansas, on which one could see construction debris, road damage, and the drilling footprint.

Smith commented: “With these images it should be no surprise about the lack of comfort over shale gas production.”

He went on to mention a better solution for Europe: multiple wellheads on a single well pad.

“Wells should be constructed with great integrity,” he said. “Fraccing fluids should not find their way into shallow sources of potable water.”

According to Mr. Smith, sound regulation built public confidence, as did a commitment to sustainable development.

“We must acknowledge that there are environmental impacts and that these impacts can be managed,” he concluded.

Source: Natural Gas for Europe

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Jan 12

 

This editorial on Investors Business Daily asks what is next for the Obama administration and the gas industry:

After enduring a holiday season with gasoline prices at all-time highs, Americans are now dealing with record high prices to begin a new year. Does the president plan to do anything?

When Barack Obama took office three years ago, gasoline was less than $2 a gallon. The national city average for a gallon of regular was $1.79. On Monday, that same regular gasoline cost $3.37, the highest mark ever to start a new year and nearly a full quarter higher than the start of 2011.

Consumers probably saw this coming while Christmas shopping. Gasoline hit $3.21 gallon, a record for the season and an increase of 23 cents over the Christmas 2010 price — the previous record, according to the Heritage Foundation, until it was broken in 2011.

If gasoline prices aren’t an issue at this point in the presidential campaign, they could be by summer. Patrick DeHaan, a senior petroleum analyst for GasBuddy.com, told the Los Angeles Times that the gas hikes are “setting up an ugly year for motorists.” So ugly, DeHaan told ABC, that by Memorial Day he expects gasoline will be $3.86 to $4.13 per gallon.

We know what the Republican candidate will propose to bring down prices. But what will Obama, who, unlike his GOP opponents is in office where he can have an impact, do?

Will he change his mind and agree to let the Keystone XL project proceed? While crude shipped through that pipeline won’t be on the market as gasoline for years, giving the project the go-ahead will affect near-term prices as the market reacts to the certainty of increased supplies in the future.

Will the president lower the barriers to development? Heritage reports that “less than 6% of federal lands and 2% offshore are open to exploration, limiting the potential of Americans to produce energy here at home.”

Doubling both those figures would bring prices down and still leave large chunks of federal and offshore zones off-limits to drilling.

Will Obama back off his administration’s assault on shale oil and gas? With the largest supply of shale resources in the world, the U.S. is sitting on an energy gold mine waiting to be developed. America is the Saudi Arabia of shale.

In fact, U.S. shale has about eight times as much oil as Saudi Arabia’s sand.

The president isn’t likely to choose any of these options — or any of the many other possibilities available to him that would increase energy production. His administration is so opposed to drilling that it even ignored U.S. District Court Judge Martin Feldman’s order to lift a drilling moratorium that it imposed in 2010.

Even so, Obama will ask consumers who’ll be paying as much as $300 more this year for gasoline than they did last year for their votes in November.

They shouldn’t give them to him. The country doesn’t need another four years of an elitist president who chokes the power of the market consumers so that he can placate narrow interests.

Just as Judge Feldman did, the voters should hold him in contempt.

Source: Investors Business Daily

 

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Dec 15

 

In a week where shale gas = job creation stories, Deloitte has issued a report which says opinion on shale gas is positive, particularly when it comes to employment:

A majority of Americans think developing natural gas by tapping shale formations offers greater rewards than it does risks, including those associated with hydraulic fracturing, according to a survey conducted by the Deloitte Center for Energy Solutions. Moreover, 8 in 10 respondents link natural gas with job creation and economic revival.

Specifically, 83 percent of respondents agree that natural gas development can stimulate job growth in the United States, while 79 percent believe the development of natural gas resources can help revitalize the economies of the states and communities where shale gas is located.

Further, the survey indicates that the public associates jobs in the natural gas industry with good pay. More than half (56 percent) of respondents in areas where shale gas development is planned or underway believe that jobs producing gas from shale formations command a “much” or “somewhat” higher pay grade than the average in their communities. The number jumps to 62 percent when looking at relatively mature shale regions like Texas.

Peter Robertson, an independent senior adviser for oil and gas at Deloitte, points out that the role of natural gas in job creation and economic revival is only going to grow as production of shale gas ramps up. Citing a separate Deloitte research project, Robertson points out that “shale gas made up a small share of domestic natural gas production in 2005, but has surged since then – and in 2010 made up 20 percent of what is produced domestically. By 2030, the portion could be close to 50 percent.”

Shale benefits seen to outweigh risks

Only 2 in 10 respondents (19 percent) feel the risks of developing shale gas “somewhat” or “far” outweigh the benefits; 58 percent believe the benefits outweigh the risks; and almost 25 percent are unsure.

Moreover, a clear majority of respondents (58 percent) in areas where shale development is underway or planned would recommend that their family and friends lease their land to a shale gas developer. In fact, 7 in 10 survey respondents (71 percent) in established shale areas like Texas, Louisiana and Arkansas would advise family or friends to lease their land to a natural gas developer.

The survey consisted of 1,694 online interviews conducted in November 2011 with adults age 21 to 74 and examined three different audience segments: residents of areas where shale gas development is an established phenomenon, specificallyTexas, Louisiana and Arkansas (537 respondents); residents of areas where shale is a newer phenomenon, specifically New York (89 respondents in New York City and 162 in western New York State) and Pennsylvania (243 respondents); and finally, the survey canvassed an additional 663 respondents in the United States nationally.

“The survey findings are especially interesting among the more mature shale areas where people are long-accustomed to oil and gas development,” said Gary Adams, vice chairman, Deloitte LLP, and leader of Deloitte’s oil and gas practice. “There, 8 in 10 respondents who currently do, or ever have, leased their land to a natural gas developer (83 percent) would do so again.”

As Adams points out, in contrast, these numbers are lower in newer shale regions – indicating a higher level of discomfort with the processes and technologies involved in shale gas development. “In Pennsylvania and New York, where people are not as used to oil and gas development, a more modest majority of respondents (52 percent) would advise family or friends to lease their land to a natural gas developer. Similarly, a slimmer majority of respondents who currently do, or ever have, leased their land to a natural gas developer (53 percent) would do so again,” Adams adds

Shale seen to improve energy independence and air quality

The survey also indicates that shale gas could play an increasingly important role in making America more energy independent: Respondents with at least some degree of familiarity with shale gas development view energy independence as the single most important benefit of shale – ahead of all other benefits, including: boosting the national economy, job creation, cleaner air, and boosting local economies. And a near majority (47 percent) of national respondents believes shale is “extremely” or “very” impactful on energy independence.

In addition, survey respondents believe shale gas development could improve air quality: 6 in 10 national respondents (62 percent) with at least some degree of familiarity with shale gas development associated the word “clean” with natural gas – making it the top association over other words such as: reliable (47 percent), domestic (41 percent), affordable (40 percent) and abundant (38 percent). Finally, 88 percent of all national respondents think it is at least “somewhat believable” to claim that “using natural gas resources to generate electricity can significantly reduce our carbon footprint.”

Strong need for better dialog, more information on shale

Still, the road to increased shale production is likely to be rocky. There is controversy about the environmental impact of shale development and heated rhetoric – all of which was reflected in Deloitte’s survey.

Most notably, respondents are not familiar with the processes involved in shale gas production: 37 percent of national respondents report being “not very” or “not at all” familiar with hydraulic fracturing – and 23 percent “never heard of hydraulic fracturing.”

Nonetheless, a large percentage of the public is aware of the dominant concerns about shale development. 58 percent of national respondents with at least some degree of familiarity with shale gas development are aware of potential water contamination issues and 49 percent know about the potential for surface-land impact issues.

Curiously, while the news media is seen as the primary source of information on shale (much higher than sources like word-of-mouth, non-profits, industry websites, academics and town hall meetings), it is not trusted: 73 percent of respondents nationally get information about shale development from the news media, yet only 17 percent see the media as “extremely” or “very” trustworthy when it comes to providing unbiased coverage of the natural gas industry.

At the same time, respondents in areas where shale gas development is planned or underway indicate that oil and gas production companies need to communicate better. While nearly half (45 percent) believe shale gas producers are “somewhat” transparent and open, just 35 percent believe shale gas companies communicate “extremely” or “very” effectively. Only 34 percent see shale gas companies as “extremely” or “very” trustworthy.

“There’s so much shale activity in so many parts of the country that it’s important to communicate and operate effectively,” said Robertson. “Everything shale gas producers do gets enormously magnified. That’s why they have to get it right every time, on every well drilled. Consistently operating with excellence and communicating effectively with all impacted stakeholders are critical attributes.”

Interestingly, the survey shows that there is faith that the shale development is currently being regulated appropriately: 54 percent of respondents nationally believe that regulation of shale development is “just right” or “evolving, but on the right track.” Approximately 20 percent think there is too much regulation and 16 percent think there is too little regulation. Ten percent are not sure.

Source: Deloitte

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Dec 15

 

Cheap natural gas flowing from the newly developing shale formations could support the growth of a million new jobs in manufacturing by 2025.

“Full-scale and robust shale gas development would likely have a number of knock-on effects for other industries, particularly the manufacturing and chemical sectors,” reads the report “Shale Gas: A Renaissance in U.S. Manufacturing?” released Dec. 14 by Pricewaterhouse Coopers.

Given a scenario of high gas production and resulting low gas prices, manufacturing and the broader economy could benefit in several ways, the report says.

Shale gas development already is driving demand for products, according to chemical, metal and industrial manufacturers’ annual SEC filings, and that will only grow, the report’s authors wrote.

At the same time, lower feedstock and energy costs could help manufacturers reduce natural gas costs by more than $11 billion a year through 2025, they wrote.

The combination of demand by the growing industry and affordable energy could mean a million new jobs by 2025.

Chemical and metals companies stand to benefit the most over the next several years, according to the study.

With lower feedstock costs, the chemical industry can justify greater capital expenditures in the U.S. — a situation already visible in the discussion of one or more ethane crackers in this region.

Metals companies will experienced increased demand as more drilling equipment is needed.

To achieve gas’s potential for manufacturing, manufacturers will need to become stakeholders in the gas industry.

“Such advocacy means supporting certain tax and regulatory issues promoting growth of the industry, as well as supporting environmentally safe and transparent gas extraction methods and public education and community outreach programs,” the report’s authors conclude.

Source: Statejournal.com

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Nov 11

 

Some interesting findings for shale gas critics.  Preliminary investigations from a study by the University of Texas Energy Institute suggests there is no link between the process used in shale gas extraction operations and groundwater contamination.

The study’s leader, Charles “Chip” Groat, a UT geology professor, noted that the dangers associated with shale gas drilling — which is accomplished by hydraulic fracturing, a process commonly known as fracking — are largely the same as other oil-drilling operations.

“Hydraulic fracturing doesn’t seem to be of concern to groundwater,” Groat said. “If there has been water contaminated related to shale gas development let’s not look at fracturing, let’s look at surface processes.”

Read the full article: Statesman.com

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