EPA report shows possible migration of fracing fluid

Oh, Frac.

Last week, the U.S. Environmental Protection Agency (EPA) issued a draft report in response to complaints of domestic well water contamination in Pavillion, Wyo. Complaints of objectionable taste and odor problems in well water occurred following hydraulic fracturing at nearby gas production wells dating back to the mid-1960s and early-1970s.

The conclusion that hydraulic fracturing fluid migrated to water tables appears to open the door for greater EPA regulation, and greater EPA regulation eventually could have significant impact on the pace and potentially the cost of fracing.

According to Credit Suisse, there are several reasons not to read too much into this report as it relates to hydraulic fracturing’s risk of ground water contamination: 1) The authors admit that they had to deduce that frac fluid migrated from the wells; 2) The study deals with far more modest distances of migration (<150 metres) than are relevant for the vast majority of current fracing activity and far less fluid appears to migrate 140 metres up from the well than 80 metres up; 3) The site specific conditions include that there is no layer of hard rock that would act as a natural barrier for fluid migration.

Nevertheless, the conclusion that there is fluid migration appears to incrementally raise the probability that the EPA may gain (national) regulatory oversight over hydraulic fracturing. And Credit Suisse has concerns that such regulation could ultimately result in higher costs of fracing and hydrocarbon development.

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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