Aug 20

Whats the ‘Fracking’ problem?

Dr Ian Woods (Head of ESG Research, AMP Capital)
Fracking (or hydraulic fracturing) is a technique that makes it possible to extract natural gas by fracturing rock layers that were once unreachable deep within the earth. It was a game-changer in the commercialisation of the well-known and vast shale gas deposits in the US. In particular, the ability to drill horizontally meant that access to natural gas could be increased by up to 50 times per well.

Environmental considerations

In order to get projects approved, built on time (as well as on budget) and also manage potential long-term liabilities, companies need to manage the environmental and social issues surrounding fracking. Generally speaking, the key environmental issues or concerns include the potential contamination of groundwater; the disposal of water runoff from coal seam dewatering; long-term integrity of the wells; and sourcing water for the fracking process.

Social issues surrounding fracking are largely universal around the globe and include misinformation and lack of trust in the community due to poor practices by early players in the industry and the issue of landowner rights over what happens on their property and what appropriate compensation would be.

Final thoughts

Occasionally, a game-changing, disruptive technology appears on the scene. The full ramifications of these innovations are rarely fully known or valued immediately and it takes time for the new industry to emerge and adjust to the new status-quo. This leaves the development of fracking activities – particularly in Australia – ina sort of stasis while legislators attempt to catch-up with the rapid evolution in technology and increasing community concerns.