What is the True Cost of Hydraulic Fracturing? Incorporating Negative Externalities into the Cost of America’s Latest Energy Alternative

Decreased technological costs and increased efficiency of horizontal drilling has made obtaining natural gas from shale deposits through hydraulic fracturing a viable economic option. However, current estimates of per kWh costs to obtain natural gas through this method do not account for increased environmental risks. By incorporating damages from air and water pollution, the true cost of hydraulic fracturing can be assessed. Results indicate air pollution from volatile organic compounds (VOCs) is higher for unconventional natural gas versus conventional natural gas. Without potential water pollution taken into account, the best estimate levelized cost of electricity for unconventional natural gas is $13.99/kWh, $1.87/kWh lower than that of conventional natural gas and $0.80/kWh higher than the best estimate for wind energy. Difference in cost between conventional and unconventional natural gas is largely due to funds spent procuring and protecting natural gas from other countries. The water pollution externality is estimated by comparing the total cost of replacing the water of all of the citizens in the water basin overlying the shale play to the total possible number of kWh energy that could be extracted from that shale for five shale plays. Replacement of water for 10 years results in an externality larger than the security cost for the Eagle Ford shale, and about half of the security cost for the Marcellus and Barnett shales. The water externality for the same period is smaller than the security externality for the Fayetteville and Green River shales. More studies are needed to determine the cause of the excess air pollution and to limit the range of water externalities. 1.0 Introduction Shale gas, also referred to as unconventional natural gas, is natural gas stored in shale deposits [1]. Shale has an extremely low permeability (about 1 microdarcy versus 1000 microdarcy of typical conventional natural gas storage rocks), which, until recently, prevented large scale natural gas extraction [2]. Advancements in horizontal drilling technology, in combination with hydraulic fracturing, have made shale gas production a viable option [3]. To extract natural gas from shale, wells are drilled vertically to the depth of the shale deposit. From there, horizontal drills are used to increase access to the shale. High-pressure injection of water and chemicals is then used to hydraulically fracture the rock, increasing the permeability of the shale [3]. Both methods have been used in oil and gas extraction for many years, but decreased technological costs, waning conventional natural gas reserves, and increased oil prices have driven a shale boom over the last few years [4]. Shale gas deposits exist all over the Earth [3]; it is estimated that the United States has 1,836 trillion cubic feet of recoverable natural gas, possibly enough to supply our energy needs for the next hundred years [5]. Natural gas also produces less greenhouse gas emissions than coal [6]. Replacing coal and imported natural gas with domestic natural gas could reduce our greenhouse gas emissions from energy production and fuel transport, respectively. However, other environmental concerns