By Vesela Veleva, ScD, Lecturer and SERC Codirector
On March 31, 2014, the Center for Sustainable Enterprise and Regional Competitiveness (SERC) hosted an event on hydraulic fracturing (known also as “fracking”). This event featured a panel of experts who discussed current challenges and opportunities for reducing the environmental impacts of fracking with a focus on the water-energy nexus. The panelists included Jim Matheson, President and CEO of Oasys Water, a clean-tech company, and Richard Liroff, PhD, founder and Executive Director of the Investor Environmental Health Network (IEHN), a group of investors concerned with the financial and public health risks of corporate toxic chemicals policies.
Dr. Liroff began the event’s discussion by providing background information on “fracking” and how investors have been engaging with companies to reduce the environmental and financial risks associated with it. While the oil and gas industry has been doing fracking for 65 years, the process really took off when technological innovations made it possible to connect hydraulic fracturing and horizontal drilling. Fracking usually involves injecting several million gallons of water, sand, and chemicals under pressure down and then horizontally at about 7,000 – 13,000 feet below the surface. This pressure causes the rocks to crack and release natural gas, which is then captured in the wells. The fracking revolution has dramatically brought down the prices of natural gas in the U.S. and led to “reshoring” – bringing back manufacturing to the U.S.
At the same time, fracking is associated with some significant environmental and health risks –water and air pollution from the injected chemicals and diesel exhaust from trucks, climate change impacts from methane leakages, damage to roads increased traffic and noise, as well as some earthquakes in the areas of drilling. Fracking is most common in the eastern portion of the United States, with Marcellus Shale considered the most productive area presently (it is located in Pennsylvania, Ohio, and West Virginia). Today fracking is taking place in 28 different U.S. States, and about three to five new wells are drilled every day.
Since 2009 institutional investors in the U.S. and Canada have been pressing oil and gas companies to become more transparent and report how they are managing the environmental and community-related impacts of fracking. In March 2013, IEHN, in collaboration with the Interfaith Center on Corporate Responsibility (ICCR), published a report entitled “Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operations.” The report provides guidance for the industry, including 12 core management goals to reduce risks and 32 indicators for companies to measure and report publicly. Two of the management goals include reducing the use of fresh water in fracking and reducing and disclosing all toxic chemicals used. Such impacts could be minimized by implementing green chemistry and water reuse. The investor group also conducted a study of 24 companies involved in fracking and found poor disclosure practices even among leading companies such as Encana and Apache. Key findings from the study, as well as recommendations for the oil and gas industry, can be found in the follow-up report, published in November 2013 – “Disclosing Facts: Transparency and Risk in Hydraulic Fracturing Operations.”
Securing water for fracking operations is a significant challenge for companies involved in drilling. On average, a well requires between 2 million and 5 million gallons of water over its life. With fresh water becoming increasingly scarce in some parts of the U.S. and globally, there is growing pressure on drilling companies to purify and reuse the processed water. The latter, however, requires a significant amount of energy, hence the problem of the water-energy nexus.
Companies like Oasys Water are at the forefront of clean-tech innovations focused on providing practical solutions to this problem. Launched in 2008, the company’s mission is “to transform the world’s most difficult waters into valuable resources.” According to Mr. Matheson, water and greenhouse gases are the two major issues facing the oil and gas industry. It takes about 5 million gallons of water to frack a well; on average, globally, for every barrel of oil companies extract, there are 3-5 barrels of wastewater. Much of this water has a very high salt and mineral content (5-15% total dissolved solids as compared to 2-3% TDS for seawater). In Texas, for example, where ~3% of the state’s freshwater resources are being used for fracking, this creates competition with the farming industry and increases the pressure on the oil and gas industry to find ways to purify and reuse the wastewater. Conventional technology for purification does not work well, and it is not economical. The cost of sourcing, treating, and disposing of wastewater ranges from 10-25% of the total cost of oil and gas production.
This is where Oasys Water’s innovation technology provides a practical and economical solution. At the core of its solution is a forward osmosis (FO) process which applies membrane technology at ambient temperature and pressure. The technology makes it possible to achieve high-quality water purification using much less energy. One of the challenges faced by Oasys Water was to design a moveable, skid-mounted platform, as the oil & gas industry desires transportable oilfield equipment. While doing the right thing is important for all businesses, it is hard economics which is the most compelling reason for oil & gas players to adopt new technologies. According to Mr. Matheson, there are several key factors that determine the value of water purification solutions: a) the cost to source freshwater, b) the cost to treat and dispose of wastewater, and c) stakeholder impact (e.g. brand value, regulation, managing social contract to operate, etc.). For example, if an area has plenty of water, disposal is not an issue, and nobody cares about what you are doing, then there is not much value that the company can provide. However, there are increasingly few contexts like that left in the world which is what is creating the need, and opportunity for new innovations, pointed out Mr. Matheson. To this end, Oasys Water is always monitoring developments in the area of fracking, both in terms of resources available and local policies, to best understand where its solutions can be most valuable and impactful.
As one looks outside the US for the adoption of hydraulic fracturing, the situation becomes both very interesting and uncertain. Shale gas is potentially located in many regions around the world, but the cost to access them as well as the public policy and mindset in these different regions, can be quite varied. For example, some countries in Europe have current bans on fracking.
As fracking becomes more of a global activity, Oasys expects to also open up more global operations. The company already has commercial activities in China and Australia and is spending time in places like the UK, Mexico, and Latin America to help shape the understanding and policy frameworks in those regions. To support these global ambitions and activities, Oasys Water partners with large companies such as National Oilwell Varco (NOV) to deliver products and services which treat the very difficult waters resulting from fracking and produce clean, drinking water much more economically than using any other technology. Oasys’ activities in the water–energy nexus extend beyond fracking and include treating effluent from coal-fired power plants, refineries, and other industrial processes. Oasys, led by Mr. Matheson, formerly a venture capitalist and a Department of Energy Entrepreneur-in-Residence, has raised $35 million in venture and strategic capital. So far, the company has nearly 50 employees and over 200 granted or pending patents. Oasys’ target market of treating these difficult waste waters to fresh water is today nearly $10B, and growing rapidly, providing ample opportunity for Oasys to become a very large company.
Following the presentations, the audience engaged in Q&A with the panelists focusing on issues such as how do we educate the industry and various stakeholders about the technological solutions; what are the best policies to mitigate the impacts of fracking; and what is the role of investors and educational institutions like UMass Boston in this process.