OUR THOUGHTS ON:

What the Frack? Part II

Energy & Resources

By Nishant Patel

“Fracking” sounds like a word we use when we don’t want to swear in front of our children. But, in the oil and gas world, this is industry lingo for hydraulic fracturing, and it is a very hot topic in Ohio and the surrounding areas. Hydraulic fracturing is a highly technical process of infusing a fracture in a rock formation underground by using liquid pressure forced into a drillhole. The pressure of the liquid helps to open the fracture and extend access through a rock formation. As a result of this process, natural gas and other natural resources may be recovered from well reserves far below the ground. With the recent discovery of natural gas reserves (i.e., Marcellus and Utica shale formations) in the New York, Ohio, Pennsylvania and West Virginia regions, the topic has quickly gained the attention of many industry and environmental interest groups.

Many claim that 2012 will be the “Year of the Shale,” since drilling activities have increased exponentially, and rural towns across the country are experiencing record levels of economic growth and prosperity. Despite this likelihood, the industry still faces a number of challenges as it continues its pursuit of the newly found abundant reserves. Any industry optimism should be tempered, because of the close and careful watch from Washington D.C. on a national level, and from public interest groups on a regional and local level.

During 2011, the Columbus Metropolitan Club (CMC) hosted a panel discussion on the implications of natural gas drilling. The panel consisted of a diverse contingency of industry and environmental experts debating a variety of economic, environmental and social responsibility issues associated with drilling activities in the region. Although each panel member brought a unique perspective to the table, it was evident that the industry is mired in a host of complex issues ranging from regulatory concerns to ensuring work-related and environmental safety.

As we move into 2012, federal and state agencies continue to show strong concern and interest in oil and gas drilling and permitting activity oversight. The Environmental Protection Agency (EPA) has shown strong interest and is potentially seeking to layer on its own set of regulations on top of existing state and local laws. The EPA has considered a variety of actions, including proposing new emission limitations on natural resource processing facilities, proposing disclosure requirements and regulating waste material as being considered hazardous.

On a local level, drilling activities in Ohio have recently come under scrutiny in light of the December earthquake in northeast Ohio. Many drilling opponents believe that the 4.0 magnitude earthquake can be directly traced back to the drilling activities taking place in the Youngstown area. In fact, the Ohio Department of Natural Resources mandated that drilling activities be suspended in the area due to seismologists’ suspicions that the drilling activities might have caused some of the drilling wastewater to travel deep into the ground, allowing a dormant fault to slip.

In a time of global economic uncertainty and political turmoil in regions across the world, the U.S. government and industry players face a complex set of challenges to find a self-sustaining resource supply. The various stakeholders must consider the challenges and impact from potential federal and state regulations and limited access to newly found reserves, and weigh these factors against the current foreign political pressures and the ambition to revitalize their own economic conditions domestically.

For more information or questions, please contact one of our Schneider Downs Energy and Natural Resources team members.

© 2012 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

comments