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Sep 29, 2016

Energy-Service Companies Tout Eco-Friendly Gas-Drilling Fluids

Published: Dec 14, 2010

By Ryan Dezember

HOUSTON (Dow Jones)--As U.S. regulators probe the mix of chemicals drillers use to tap deeply buried rock formations for oil and gas, energy-service companies are touting new, environment-friendly formulas aimed at quelling contamination fears.

By pumping millions of gallons of chemical-laced water thousands of feet below the surface to crack open shale-rock formations, drillers are able to release large amounts of fossil fuels. This technique of hydraulic fracturing, or fracking, has led to an unprecedented boom in U.S. natural-gas production, but also has prompted concerns over the pollution of ground and surface water.

Incidents of alleged contamination of drinking wells in north Texas and rural Pennsylvania with potentially cancer-causing chemicals have triggered a public outcry and state and federal investigations into the practice. Oil-field services companies including Halliburton Co. (HAL) and Baker Hughes Inc. (BHI), which resisted disclosing the ingredients of their products, are now on the hunt for fracking fluids that are clearly benign.

"It's really important to know exactly what's being used," said Dusty Horwitt, senior counsel for the Environmental Working Group, a nonprofit research and advocacy group based in Washington. "It would be a step in the right direction if the industry truly used fluids that were not toxic."

Houston-based Halliburton--the No. 1 shale driller in the U.S.--is rolling out a fracking-fluid product called CleanStim that it says consists exclusively of compounds used in processed foods. "The same components to make this stuff are used to make ice cream and brew beer," Jim Brown, Halliburton's Western Hemisphere president, said during a recent meeting with investors.

Baker Hughes last week launched a line of products called BJ SmartCare in which well owners can customize their fluids from a slate of components that are ranked according to factors such as toxicity and flammability. Although the company declined to specify what most of the contents of the cleaner compounds are, the ingredients include fatty acids, essential oils and guar gum, which is found in toothpaste and ketchup.

Meanwhile, drilling supplier Flotek Industries Inc. (FTK) said last month during a conference call with analysts that it has completed successful field trials of a new batch of biodegradable fracturing chemicals using compounds extracted from citrus products. Calls to Houston-based Flotek for comment weren't returned.

Oil and gas producer Devon Energy Corp. (DVN), which employs both Halliburton and Baker Hughes, has begun to use some of the new products in its wells.

"The industry as a whole is going that way," said Chip Minty, a spokesman for Oklahoma City-based Devon, which has substantial shale-gas operations in Texas, Oklahoma and Louisiana. "It's very new technology, but it's certainly something that's viable economically."

Halliburton said its CleanStim will add about 5% to 10% to total drilling costs. Baker Hughes said its more environmentally friendly products have a "minimal" impact on drilling costs.

Both the U.S. Environmental Protection Agency and the House Committee on Energy and Commerce have requested data from oil-field services companies detailing the chemicals contained in their fluids. Companies have generally hesitated to do so, since they consider their recipes trade secrets. But recently, several companies relented under pressure from the government--including a subpoena from the EPA in Halliburton's case--and handed over information to federal regulators.

The congressional committee has said that Halliburton and BJ Services, which was later acquired by Baker Hughes, have acknowledged using thousands of gallons of diesel-based fluids in their fracturing operations between 2005 and 2007 despite a voluntary agreement with the government not to do so. The fluids also contained benzene--believed to be carcinogenic--toxic and explosive toluene and xylene, and ethyl benzene, which can cause mutations on mammalian cells, the committee said.

Pennsylvania's Department of Environmental Protection, after an investigation, said that natural gas from a shale well operated by Cabot Oil & Gas Corp. (COG) contaminated a water source. Last week, the EPA said that Range Resources Corp. (RRC) polluted a pair of drinking wells in northern Texas.

The recent effort by Baker Hughes to offer cleaner chemicals includes substituting mineral oil for more noxious forms of petroleum, said Lindsay Link, who heads the Houston company's pressure pumping business. "We're finding that there are a lot of good materials out there that are less hazardous and actually act better than our old materials," he said.

In developing CleanStim, Halliburton sought a product that would be undeniably eco-friendly, said Matt Oehler, who runs Halliburton's global production enhancement business.

"We can always come out with a product and say this product is greener than the last three that we had without having any definition of what green is," Oehler said. So the company asked its scientists to cook up a fracturing fluid using only ingredients the Food and Drug Administration has approved for human consumption.

So far, Halliburton--the world's second-largest oil-field services company--has tested the product on 13 wells and has begun to offer CleanStim to its customers. Oehler said that the cost of CleanStim will fall once it catches on and Halliburton can buy larger volumes of ingredients, such as maltodextrin, a sweetener and shower gel component, and organic ester, which is found in liquid egg products and hairspray.

The Environmental Working Group's Horwitt said that while eliminating toxins from shale wells is a positive step, the risk of polluting ground water wouldn't be eliminated. The fracking process, Horwitt says, unleashes petroleumlike condensate from natural-gas reservoirs that could penetrate aquifers and spill into surface waters. Like the fracture fluids the government has studied, condensate also contains benzene, xylene, toluene and ethyl benzene.

-By Ryan Dezember, Dow Jones Newswires; 713-547-9208;

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