U.S. Silica Holdings (NYSE: SLCA) reported second quarter profits of $19.5 million, triple the same period last year, driven by demand for proppants, which are used by the oil and gas industry during hydraulic fracturing. The company is the second largest producer of commercial silica in the United States, including its Ottawa White and Shale Frac branded proppants.
Canadian Pacific Railway formed a partnership with Smart Sand, another silica producer. Under the deal, CP Railway will ship drilling sand to areas hosting unconventional oil and gas plays in North America, including the Bakken and Marcellus Shale formations. BNSF Railway recently signed a similar deal with US Silica.
Meanwhile, the US Occupational Safety and Health Administration (OSHA) recently issued a hazard alert to employers engaging in hydraulic fracturing operations, requiring those employers to take adequate steps to protect workers from silica exposure. According to OSHA, “workers who breathe silica day after day are at greater risk of developing silicosis, a lung disease.” The National Institute of Occupational Safety and Health studied 11 fracking sites in five states and found that nearly 80 percent of all air samples taken showed exposure rates above federal recommendations.
One of the most commonly used hydraulic fracturing chemicals is guar. Verenium Corporation has obtained Environmental Protection Agency authorization to sell its next-generation cellulase enzyme for non-food applications, such as breaking down the guar-based gel used in hydraulic fracturing. The company estimates the addressable market in the U.S. for guar breakers in hydraulic fracturing is $250 million.
The Fort-Worth Star Telegram has a lengthy piece on Frac Tech Services (now FTS International). Founded in 2000, the company grew to more than $2 billion in annual revenue and 3,700 employees last year, making it one of the largest hydraulic fracturing companies in the world. PacWest estimates that fracking is a $30 billion industry in the United States.
The Wall Street Journal reports on a leaked memo from Nationwide Mutual Insurance Company indicating that it will not cover damage related to a gas drilling and hydraulic fracturing. According to the memo: “After months of research and discussion, we have determined that the exposures presented by hydraulic fracturing are too great to ignore…”
The University of Texas at Austin announced that it will conduct an investigation into a report issued by its Energy Institute which found no evidence that hydraulic fracturing contaminates groundwater. Contrary to University requirements, the Institute’s director and author of the report, Charles Groat, failed to disclose that he is director and stockholder of Houston-based Plains Exploration and Production Company, a company that engages in hydraulic fracturing. Groat’s shares are reportedly worth about $1.6 million, or nearly 10 times his annual salary as a professor.
A report from Earthworks concludes that the New York State Department of Environmental Conservation, the agency in charge of enforcing fracking regulations, has a staffing shortage and rarely inspects existing conventional gas wells. From 2001 to 2010, the number of annual inspections of oil and gas wells dropped by more than 1,000, the group found, while the number of wells increased by about 1,000 during the same period. Overall, it found that more than 75 percent of the state’s active oil and gas wells go uninspected each year.
In a recent New York Times op-ed, Jody Freeman, a Harvard law professor, writes that “Congress must lift the regulatory exemptions for hydraulic fracturing.” This would clear the way for a system of federal oversight that will promote confidence in hydraulic fracturing and provide the industry with uniform standards without overregulating it.
By contrast, the Petroleum Technology Alliance Canada (PTAC) recently published “The Modern Practices of Hydraulic Fracturing: A Focus on Canadian Resources.” The report concludes that existing Canadian provincial regulations are sufficient “to protect the environment, water and human health”