Sucking Up Water and Sand in the Quest for Natural Gas

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Ronald Ruiz with the Edwards Aquifer Authority says the decision could be "landmark-type direction in ground water usage."

A ruling in favor of the authority would most likely allow water districts to continue the business of regulating water in priority areas where supply issues are critical. If the court rules in favor of the landowners, water management across the state could drastically change as all conservation districts could be open to a lawsuit every time they tried to restrict usage.

Of course, water isn't the only natural resource in high demand. More than half of U.S. homes use natural gas as their main source of heat, and according to the U.S. Energy Information Administration, Texas was the top user of natural gas in 2009.

The information administration estimates that there is possibly 100 years worth of natural gas under U.S. territory. While drilling for natural gas continues to be an environmental problem, it is actually a relatively clean-burning fossil fuel.

There is even a modest expansion in the compressed natural gas (CNG) vehicle market, with about 110,000 such cars in the United States.

A 2002 study compared a fleet of UPS trucks running on CNG with diesel vehicles. The CNG trucks produced 75 percent lower carbon monoxide emissions, 49 percent lower nitrogen emissions and 95 percent lower particulate matter emissions.

As promising as that sounds, for the gas industry there's a Catch-22: If the price for natural gas gets low enough that a significant portion of the population is ready to convert their vehicles, then the price is probably too low for gas companies to make enough profit. Natural gas prices are three times higher in Europe and Asia compared with the States, and some industry experts point to exporting as a way to bring about stability. Or energy companies could choose to drill for oil instead of gas.

According to the Energy Information Administration, in July 2008 the price for natural gas in the U.S. peaked at $10.79 per million BTUs. The average price in June this year was $4.12. These falling prices are what prompted EOG Resources to try the same natural gas fracking technique in oil fields. Recently they have scooped up long-since abandoned liquid-rich shale formations all over Texas and are using the same method of blasting water and sand into shale to release the oil. And they've had great success with it.

This year alone, EOG expects to have 250 of these types of oil wells completed and another 250 in 2012. Their recent second-quarter net income of $295 million earned them the designation of a "Hot Stock" by The Wall Street Journal. On an August 5 conference call, EOG's Chief Executive Officer Mark Papa discussed those earnings with nine Wall Street analysts listening in. To close out the meeting, Papa said this, according to a transcript from SeekingAlpha.com:

"I'm really just befuddled. Why anybody in the industry pays the slightest attention to natural gas growth in North America is beyond me. And I continue to see particularly well-sided write-ups that say, 'This company is growing at this rate.' In my mind, it doesn't matter if you're growing at that rate if your primary driver of your growth is natural gas, which is barely profitable at best."

Which brings us back to the issue of the parched land, empty ponds and a stressed aquifer. For the people around Saint Jo, this is a battle of David versus Goliath, and the fight is for clean land, air and water.

In a recent interview in the Muenster Enterprise (near Saint Jo), two EOG representatives attempted to smooth tensions by answering questions from locals about the sand mine. In a futile effort to get an invite to a potluck, they mentioned twice that EOG was listed on Fortune's list of 100 Best Places to Work.

Around the same time, Papa remarked on his Wall Street conference call that they have a new sand mine in Wisconsin that will be up and running by the fourth quarter. He added that by self-sourcing frack sand, " ... we expect to save about $1 million per well."

If EOG is able to save money by shipping sand from Wisconsin into Texas, one could only guess how much more they could save on transportation with Saint Jo frack sand.

There's always a bottom line.

As Amy Hardberger wrote in her article, "Water For Gas: A Tradeoff Texas Needs to Consider":

"Proponents of fracking argue that the water amount per unit of energy produced is smaller than other types of fuel. Others point to the lucrative nature of drilling to defend its importance. While both of these statements may be true in a vacuum, it will provide little solace to a region whose water supply is depleted by gas development."

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Lauren Drewes Daniels is the Dallas Observer's food editor. She started writing about local restaurants, chefs, beer and kouign-amanns in 2011. She's driven through two dirt devils and is certain they were both some type of cosmic force.