Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The U.S. Environmental Protection Agency recently announced that hydraulic fracturing – or fracking – may be the cause of groundwater pollution in a Wyoming community. However, upon closer examination it appears that the federal agency’s findings may be flawed, say investment and industry groups.
In its draft analysis of data from its investigation into drinking water in Pavillion, Wyoming, the EPA found compounds associated with fracking in ground water, according to a release from the federal agency.
Residents in the area have reportedly said that their drinking water smells of chemicals and the EPA has been investigating such claims – along with Wyoming officials and the owner of the oil and gas field, Encana Corp. (ECA:NYSE) – for the past three years.
However, a number of sources have pointed out that there are potentially serious flaws in the EPA’s findings.
One issue is that the investigation did not establish a connection between deep and shallow water contamination in the aquifer. According to Global Hunter Securities, this may show that that the fracking fluid was unable to meaningfully migrate upward through strata. This is even more significant because as the EPA notes there was no serious stratigraphic barrier to prevent such a migration at the site in question.
Another serious issue with the investigation is that the water in question is produced from a reservoir that also naturally produces significant levels of hydrocarbons, so the presence of such substances is not surprising. Global Hunter also points out that it shouldn’t be surprising that synthetic substances were found in the reservoir as it has been developed commercially for nearly 50 years.
The whole issue begs the question—where was the EPA for the last 50 years as conventional oil and gas was being produced from a drinking aquifer?
Additionally, a Credit Suisse note mentions that the alleged migration distance (less than 150 meters) is far less than in most of the other wells in the country. Almost all, if not all, fracking is done between half a mile and two miles underground, well below any groundwater reservoir.
For its part, the EPA did say in the release that these findings were only for the Pavillion area. Specifically, the fracking was taking place close to wells used for drinking water and below the level of the water aquifer. Fracking methods in other regions of the country vary due to different geological conditions.
Given the scientific flaws in the report, it’s unclear if this eye-grabbing report will have any actual effect on fracking operations throughout the country.
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