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Study: New fracking regs will add $500,000 to cost of well

July 09, 2010
A new study by consulting firms Tudor Pickering Holt and Reservoir Research Partners says new regulations on hydraulic fracvturing, either at the state or federal level, would add at least $500,000 to the cost of every well drilled.

From Platts:

Analysts from the companies said the Macondo oil spill in the Gulf of Mexico and recent shale gas play site accidents will have a negative impact on the ongoing fracking debate.

"If you think no-one will connect deepwater oil to onshore shale, think again," the report said. "Both the oil spill and recent gas drilling accidents spotlight the inherently difficult nature of the oil and gas business and have tarnished industry credibility."

The additional costs per well without federal regulation could reach $200,000 to $500,000, on top of current costs per well, which are coming in between $2.5 million and $10 million, the analysts said.

The extra money will be needed for extra well casing, more rigorous cementing and water treatment and the amounts will vary by locale and geology, they said. If Congress does mandate US Environmental Protection Agency oversight of fracking, costs could rise by between $125,000 and $250,000 per well, they added.

The analysts said the costs could be less than that though given that exploration and production companies are already working on, or employing, technologies to deal with produced water discharges.

"The industry will have no choice but to spend more money to protect itself from liability and reputational risk as the shale-drilling boom marches on," the report said.

"Some companies are in fact already choosing to spend more; one major producer told us: 'We don't see the costs as that overwhelming,'" the consultants' analysts said.

The analysts said the chance of federal regulation passing is low.

The EPA announced in mid-March it would carry out a broad study of fracking. It is holding public hearings on the study's design this summer. It has secured $1.9 million in funding for this fiscal year and could get up to $4.4 million in the coming year. The study's results are expected between 2012 and 2013.
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