Fracking in New Zealand

by Rebecca Macfie / 14 January, 2012
Concern is mounting about the environmental dangers of fracking – fracturing subterranean rock to get to the oil and gas.


The oil and gas industry is a bit touchy these days about the subject of hydraulic fracturing – better known as fracking. Too much misinformation is being put about in the media by folk with an axe to grind against the resources sector, they say.

So let’s go to one of their own for a straightforward description of how fracking works. Here’s Drew Cadenhead, chief operating officer of Canada-based Tag Oil. The company is aggressively expanding its operations in Taranaki, and has permits over vast areas of the North Island’s East Coast, stretching from Te Puia Springs to southern Hawke’s Bay, where it is searching for oil held in deep shale rock.

You drill down, he explains, and then “you turn the bit and you drill horizontally. And you start drilling, drilling, drilling. You’ve got a kilometre of hole going along here now. Then you go to the end of that hole, and you start fracturing it. Crack! And you do it again. Crack! Crack! And you do it all the way along that whole thing. You’ve just busted the shit out of a kilometre of the stuff, and all of a sudden seven, eight thousand barrels a day is comin’ through that hole.

“It’s called an unconventional oil play, and it really is at the forefront of what we’re doing down on the east coast of New Zealand right now.”

Cadenhead’s enthusiasm for busting open fuel-rich shale rock – described by geologists as the earth’s “kitchen” where oil and gas are cooked – has been matched by executives at Wellington-based L&M Energy, which told the sharemarket in June that it planned to explore “shale plays” in Canterbury and Southland, where there was “significant shale gas potential, analogous to some of the most productive shale acreage in the USA”.

No wonder they’re excited. In the US and elsewhere around the globe, the development of horizontal drilling and fracking as a way of unlocking the oil and gas held in shale and other impermeable rock is revolutionising the energy market. The industry calls it unconventional with good reason. “Conventional” gas and oil accumulates over millions of years in porous rocks, which give up their riches upon simple drilling, but the fuel in shale and other “tight” rock does not flow readily and was long thought to be too difficult and expensive to extract.

Fracking has changed all that. As conventional oil and gas sources dwindle, it’s expected that 70% of the world’s future reserves will come from unconventional resources, according to Tag’s website. And shale rock is not the only candidate for exploitation using horizontal drilling and fracking; other “tight” rocks include sandstones and coal seams. The technique has already turned the US energy industry on its head. A few years ago, it was on the verge of having to import natural gas; now it has so many fracking rigs producing so much gas from the continent’s vast shale beds that it could end up becoming an exporter of the stuff. Other countries keen to join the fracked-gas rush include China, Poland, the UK, Ukraine and Australia.

The Government wants New Zealand to become a net exporter of oil and gas by 2030. But some other countries are slamming on the brakes, as controversy mounts over the environmental cost of fracking. Moratoriums have been imposed in France, South Africa, New South Wales, New York, New Jersey and Quebec in response to allegations that the practice can contaminate groundwater and leave a legacy of hazardous waste.

To fracture the deep fuel-rich rock, huge volumes of water (between seven and 18 million litres for a single shale well, according to the US Environmental Protection Agency), laced with a cocktail of chemicals and sand, are pumped underground at enormous pressure. The chemicals help ensure the sand is transported into the cracks, where it props open the gaps and enables the gas or oil to flow. Some of the fluid comes back up and has to be disposed of, and some stays in the ground. The process is controversial. In drilling regions of the US such as Pennsylvania and Wyoming, locals allege that fracking fluids and gas have migrated into their well water.

The documentary movie Gasland popularised these concerns with graphic images of residents holding cigarette lighters up to their running taps, causing the water to explode in a ball of flame. Many recounted stories of illness in their households, and sick and dying animals. Some said their water had turned brown and smelt foul, and they were forced to truck in water after their wells were ruined.

Thanks to the so-called “Halliburton Loophole” ushered through Congress in 2005 by then Vice-President Dick Cheney – one-time chief executive of energy giant Halliburton, one of the big names behind the fracking revolution – the industry is exempt under the US Safe Drinking Water Act from disclosing the chemicals it uses in fracking. However, a recent study by the US House of Representatives energy and commerce committee found that between 2005 and 2009, the industry used 29 chemicals that were either carcinogens or posed other risks to human health, or were hazardous air pollutants. Among them were benzene, toluene, xylene and ethylbenzene – known collectively as BTEX – of which benzene is a carcinogen.



And in the face of consistent denials by the industry that it is damaging groundwater, the Environmental Protection Agency (EPA) reported last month that chemicals associated with fracking had been found in groundwater in Wyoming. The EPA is in the middle of a major study of the risks of fracking, the results of which are expected at the end of the year.

In Australia, landowners and gas companies are in conflict over access to precious water supplies as drillers tap into huge reserves of coal seam gas. A recent Senate inquiry recommended a moratorium on coal seam gas projects in the Murray-Darling basin because of fears for the water resources of the Great Artesian Basin.

The industry has consistently denied the charges against it, insisting that fracking fluids can’t infiltrate ground­­water because drilling takes place hundreds or even thousands of metres down and is separated from aquifers by dense layers of rock. It claims the flaming tapwater seen in Gasland can’t be attributed to fracking, and instead blames poorly encased water wells into which methane has naturally migrated.

In New Zealand the headlines about fracking have been full of reassurances. The resources sector here insists that the nasty scenes shown in Gasland could not be repeated in this country because of our excellent environmental regulation and high-quality industry practice. In addition, the scale of fracking activities in the US is unlikely to be replicated here.

John Pfahlert, chief executive of the Petroleum Exploration and Production Association, says the BTEX cocktail is not used in modern fracking. He says the chemicals used by frackers in New Zealand – for instance antifreeze, glutaraldehyde, guar gum and biocides – are also found in common household products, including ice cream. Moreover, they are at such low concentrations – around 2% – that they’re non-toxic.

Solid Energy, which is experimenting with fracking for coal seam gas in the Waikato, says it decided not to use BTEX even though its Environment Waikato resource consent allowed it. Steve Pearce, Solid Energy’s general manager of gas developments, adds that coal seam gas extraction doesn’t involve the huge volumes of water required for shale gas, and the water that Solid Energy uses is saline, drawn from deep underground. Pearce says the operation is heavily monitored under its Environment Waikato resource consent. “I can state we have had no effect at all on the water table. Everyone sees the Gasland video and assumes that’s what’s happening here. It’s not.”

Indeed, the whole industry says it’s as clean as a whistle. “There has never been water contamination in New Zealand as a result of fracking, or an oil and gas operation generally,” states a position paper put out by Pfahlert’s group, in concert with Solid Energy and resources lobby group Straterra.

Still, fracking is a delicate subject if the response of L&M Energy is any indication. Having bullishly talked up the potential for a shale gas “play” in Canterbury and Southland and extolled the virtues of horizontal drilling and hydraulic fracturing in its June statement to the sharemarket, L&M told the Listener in late November it had no plans to frack. Managing director Kent Anson says the company’s exploration permits in the South Island are for coal seam gas, not shale, and it shouldn’t be assumed that coal seam gas extraction requires fracking. He warned he would demand a retraction if our story said it was fracking, or intended to do so.

And Tag Oil’s exploration partner on the East Coast, Texas-based Apache Corporation, freely acknowledged it was unhappy when it discovered the colourful fracking video Tag’s Drew Cadenhead had prepared, which included the statement that the method was at the “forefront” of the company’s plans in the region. Apache spokesman Alex Ferguson says fracking may not even be required on the East Coast, where the rock appears to be naturally fractured. Indeed, despite Tag’s corporate communications referring to the East Coast permit areas as a “shale play” comparable to America’s most prolific shale fields, Ferguson says “it’s probably not shale at all”, and is more of a “tight sandstone play”.

“It’s probably a misnomer for Tag to have put that on its website. In its defence, internationally in the oil and gas world, if you can promote your material as a shale of any kind you usually get a lot more interest,” says Ferguson. So it depends on who the audience is? “Pretty much.”

But if oil and gas companies can appear to indicate one thing to the sharemarket and another to the public, how much trust can communities have in their word? That’s one of many questions that have been occupying the mind of Taranaki woman Sarah Roberts since August last year, when Tag Oil came knocking with news that the company intended to “aggressively move forward” with the expansion of its Cheal A and B well sites at Ngaere, about a ­kilometre from her husband’s family farm. They were asked to sign a consent form allowing Tag to develop 16 new wells, which would bring the Cheal operation to a total of 30 wells.

Roberts and husband David Morrison – whose family have owned the farm for two generations – were reluctant to sign until they could be confident the operation would be tightly monitored. In particular they were worried about the safety of their water, which comes from a spring near the well site. In her hunt for information, Roberts discovered Tag had been fracking at the Cheal site – without the knowledge of the locals – at the relatively shallow depth of 1750m. And although the Taranaki Regional Council (TRC) and the oil and gas industry were issuing public assurances about the quality of regulation surrounding the industry, it turned out that fracking operations didn’t even require resource consent.

After receiving a legal opinion, the council has recently changed its stance, and companies are now required to obtain resource consent to frack – but the council has made it clear these are likely to be non-notified, which means objectors will have no opportunity to be heard. Roberts also discovered that “power fluid” – used to heat wells to improve the flow of oil – had been leaking for two years from the Cheal site, but no enforcement action was taken by the council.

The resistance of Roberts and Morrison to Tag’s plans became a major local controversy. Their refusal to sign forced Tag to a contested public hearing over land-use consents for the expanded Cheal operation, and they faced accusations that they were holding up progress and jeopardising the jobs of over 40 drillers.

The hearing commissioner recommended that the land-use consents be granted, but Roberts and Morrison have not given up and have taken their complaints to the Parliamentary Commissioner for the Environment. In the meantime, Tag Oil has told the community it’s not planning to frack again at Cheal, despite earlier telling the Vancouver stock exchange that the wells were “fracture-stimulation candidates”. At the Morrison farm, however, they are not taking chances and have started trucking in water for household use. They are still waiting for the council to test their water for the presence of drilling contaminants.

In the midst of the debate over Cheal, the council published a review of the history of fracking in the region, which concluded that out of 43 fracking operations on 28 wells between 2000 and 2011, there was “no evidence of related environmental problems”.

“If hydraulic fracturing operations are carried out properly, it is unlikely that contaminants will reach overlying freshwater aquifers in the Taranaki region,” said the report, which relied heavily on information provided by the oil and gas companies and has been celebrated by industry group Straterra as giving the “green light” to fracking. Yet just half an hour down the road from the Morrison farm is the Kapuni gas field, where fracking has been going on since 1991, and where there is evidence of long-standing contamination of groundwater caused by well fluids seeping through unlined ­storage pits.

In a report published by the TRC in June last year, groundwater beneath well “blowdown” pits at five Kapuni well sites was described as unsuitable for drinking or stock use, and unsuitable for irrigation at two sites. Benzene, ethylbenzene, xylene and petroleum hydrocarbons at levels above Ministry for the Environment guidelines were recorded at several sites, many of which are close to farmhouses. The pits have been used to temporarily hold “clean-up” fluids that come to the surface when a well is brought into production. This mixture also contains hydrocarbons that are flared off. Until 2006, the pits were used without resource consents.

Rob Jager, general manager of Shell Todd Oil Services (STOS), which owns the Kapuni operation, says some of the pits have been used to receive fluids from fracked wells, but that this is unlikely to be the source of the contamination. He says STOS no longer uses the pits, and describes the contamination as a “legacy issue” about which the company is seeking advice. He says STOS plans to frack five wells over the next two years – at depths of about 3500m – as part of a campaign to try to extend the life of the Kapuni field. Steel containment tanks will be used instead of the unlined pits.

Aside from being asked by the regional council to remove the well fluids from the pits and obtain resource consents, no action was taken against STOS over the contamination. However, the South Taranaki District Council, which knew nothing of the issue until it was raised by Roberts in early December, has decided to start testing the Hawera water supply – fed by the Kapuni Stream, which runs close to some of the contaminated sites – for traces of BTEX.

Doesn’t the evidence of contamination at Kapuni cast doubt on the regional council’s claims that the region’s groundwater is safe from fracking, and that current regulation is adequate to manage any environmental effects? Fred McLay, TRC resource management director: “You’ve picked one particular case. There are many more cases where monitoring has shown absolute compliance. So I think you’re dealing with a bit of a one-off here.”

McLay says the Kapuni example should not be taken “as a case study as to the way we regulate the oil and gas industry. The company found there was an issue, it has resource consent, we’ve got regulation around that … We actually have a reputation here for using the enforcement powers of the Resource Management Act more than any other council in New Zealand because we think that provides integrity.”

But neither McLay’s assurances, nor those of the oil and gas industry, appear likely to hose down public concern about the prospect of more aggressive fracking operations in the future. The Green Party is circulating a petition calling for Parliament to impose a moratorium on fracking and direct the Parliamentary Commissioner for the Environment, Jan Wright, to mount an investigation into the practice. And late last year the Christchurch City Council passed a motion calling for a moratorium until the risks have been independently examined.



Wright’s office has received a steady stream of requests for an investigation, and she says her office is doing some scoping work. In the meantime, other communities are taking a wary attitude to the arrival in their midst of companies with designs on the energy riches deep beneath their feet. Apache – which is involved in North American fracking operations and has committed $100 million to its partnership with Tag Oil on the East Coast – has been meeting local iwi and other community groups in a bid to ease their concerns and explain the exploration programme.

One who remains unconvinced that the economic gains outweigh the environmental risks is Gisborne District councillor Manu Caddie. “The industry says nothing bad has happened in New Zealand, but should we wait until something bad does happen? Or should we take a precautionary approach and really investigate it before we open this country up?” Even if the fracking process itself does not cause problems, Caddie says, there is the issue of dealing with the toxic waste afterwards – “a legacy you have to deal with for generations” – and the risk of failures such as well blowouts. He argues that a moratorium is the only sensible option. “We have limited knowledge, and when you have whole countries overseas [putting moratoriums in place], it seems prudent to have a proper investigation.”

Even Apache’s Ferguson – a former British Columbia oil and gas regulator – urges New Zealand communities to think carefully about the issue, and concedes that there are problems in the US gas industry. “The States are near and dear to Canada … God bless them, especially in this industry, my experience always has been [that] they’re like the cowboys next door.” New Zealand, he says, needs to do its own research, figure out the rules it wants the industry to abide by, and identify “the values you hold dear and decide this is how you’re going to make sure they are not negatively impacted.

“There is no easy answer. I don’t expect people to believe Apache or any other oil company that comes in here. We’re here to do our business, so you don’t want to believe us. But on the other hand don’t believe arbitrarily some of the other things that are out there either. I don’t think there is an easy shortcut.”

DIGGING INTO SHAKY GROUND


Does fracking cause earthquakes? In Canterbury, where L&M is exploring for coal seam gas, this question is at the forefront of the fracking debate. The answer, according to a US geophysicist who specialises in induced seismicity, is yes. American geophysicist Michael Hasting told a Christchurch public meeting late last year that the injection of fluids deep underground under huge pressure – in the order of 7000 to 10,000 PSI – causes the rock to fracture, producing "induced" earthquakes.

"You basically need these earthquakes to produce the fracture system and permeability in reservoirs." Most are too small to feel at the surface, with 95% smaller than magnitude 1. But Hasting says fracking can cause large earthquakes in seismically active areas. "If you're injecting high-pressure fluids into a fault or near a fault that is active and near failure – that's stressed to the point where it's near to going – the fluids can lubricate the fault and cause it to slip."

It has happened. "In Colorado at the Rocky Mountain Arsenal, they were injecting fluids along a fault over a period of a few years and they noticed increased seismicity in the area. On August 9, 1967, they had a magnitude 5.5 event." The project, which was to dispose of wastewater, was shut down as a result.

In the Swiss city of Basel, fracking at a geothermal project is claimed to have triggered several earthquakes in the magnitude 3 range between December 2006 and January 2007. It, too, was subsequently shut down. And in 1979 through to the late 1980s at a geothermal field in Baja California, there were several magnitude 5 events allegedly triggered by fracking, with the largest measuring 5.4. So, should fracking go ahead in Canterbury without first checking the earthquake safety of the region?

"No," says Hasting, who stressed he was a supporter of fracking if it is done well. "You shouldn't do it. It would be absolutely irresponsible to go out in an area like Canterbury, which is a known area of tectonic fractures, and start injecting fluids without understanding the reservoir, the system, and where you are injecting these fluids. You want to determine where these faults are and how close they are to failure before anything is done. You can't 100% guarantee that you won't induce a large event in a tectonically active area like New Zealand."

A series of small earthquakes last year near Blackpool in England has been linked by the British Geological Survey to a fracking project run by Cuadrilla Resources. A subsequent study commissioned by Cuadrilla confirmed the link. There have been suggestions that a recent series of earthquakes in Oklahoma – including a magnitude 5.6 – may be linked to fracking in the state.
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