Sustainability lessons from shale development in the United States for Mexico and other emerging unconventional oil and gas developers
Abstract: Mexico's recent energy reform (2013) has provided the foundations for increased private participation in attempts to offset or reverse the country's continued decline in fossil fuel production. This country is currently on path to becoming a net energy importer by 2020. Conversely, in 2015, and for the first time in over 20 years, the United States (US) became a net oil exporter to Mexico. One of the strategies being pursued by Mexico to prevent an impending supply–demand energy imbalance is the development of shale resources using horizontal drilling and hydraulic fracturing techniques. Hence, an evaluation of the inherent risks associated with hydraulic fracturing is crucial for Mexico's energy planning and decision-making process. This paper draws lessons from the recent ‘shale boom’ in the US, and it analyzes and summarizes the environmental, social, economic, and community impacts that Mexico should be aware of as its nascent shale industry develops. The analysis seeks to inform mainly Mexican policy makers, but also academics, nongovernmental organizations, and the public in general, about the main concerns regarding hydraulic fracturing activities, and the importance of regulatory enforcement and community engagement in advancing sustainability. We highlight that Mexico should only develop its unconventional resources after careful evaluation of all potential impacts and after the formulation of regulation intended for their mitigation. Furthermore, using the US as a case study, we argue that development of unconventional oil and gas resources in Mexico could lead to a short-term boom rather than to a dependable and sustainable long-term energy supply. Our analysis concludes with a set of recommendations for Mexico, featuring best practices that could be used to attenuate and address some of the impacts likely to emerge from shale oil and gas development.
Summary (5 min read)
- With the advent of hydraulic fracturing , the use of natural gas has increased considerably.
- While shale exploitation can provide some short-term localized economic benefits for resource-endowed nations, evidence from the US suggests these might be accompanied by a variety of environmental, social, and community-related problems .
- In the US, the advent of hydraulic fracturing combined with horizontal drilling has changed the oil and gas industry dramatically .
1.1. Brief history of hydrocarbon development in Mexico
- Mexico began intensive development of its hydrocarbon resources in 1904 .
- The rationale advanced by the government was that oil, as an energy source, belonged to “all Mexicans,” and as such, government entities alone should exploit them for the sole purpose of benefiting the country .
- This was achieved largely because of the discovery in 1979 of Cantarell, the world's third largest oilfield at the time (just behind the Ghawar and Burgan oilfields of Saudi Arabia and Kuwait).
- This newfound bounty came with promises of jobs, technological development, commitment to industrialization, and sustainable city building.
- By 2004, Mexico's largest oilfield had reached its maximum rate of petroleum extraction, after which it entered a state of terminal decline [20,21].
1.2. Current state of shale development in Mexico
- The decline in hydrocarbon production has spurred support for the development of Mexico's unconventional resources as a means of reversing the situation.
- In 2011, the US Energy Information Administration reported that Mexico has the second-largest shale gas potential in Latin America and the fourth largest globally.
- According to a public information petition made to PEMEX in 2014, at least 924 wells have been fractured hydraulically in Mexico since 2003 .
- This inconsistency highlights the urgency for transparency in information, while illustrating the pressing need for a comprehensive regulatory framework aimed at protecting the local communities and the environment.
2.1. Land impacts and issues
- Oil and gas drilling activities require extensive use of land .
- In addition to direct impacts related to land clearance, there might also be indirect effects on ecosystems near the affected area due to the “edge effect” .
- Apart from issues associated with land clearance, spills of toxic oil and gas hydraulic fracturing fluids can have severe environmental impacts in neighboring areas.
- In lieu of permanent infrastructure, many operators dig pits in the ground, line them with plastic or vinyl sheets, and use them to store water both before and after the hydraulic fracturing activity .
- It is worth noting that because development is ongoing, large-scale restoration efforts do not yet exist; hence, details about the effectiveness of restoration remain vague.
2.2. Atmospheric impacts and issues
- The main atmospheric impacts associated with hydraulic fracturing activities are related to the emissions of both greenhouse gases (primarily methane) that contribute to climate change and VOCs that affect air quality.
- These flaring practices, which are usually a consequence of a lack of access for transportation infrastructure, cause considerable emissions that are the product of wasted resources .
- The samples that surpassed the health-based risk threshold levels were 90–66,000 times the background levels for hydrogen sulfide, 30–240 times the background levels for formaldehyde, and 35–770,000 times the background levels for benzene.
- A recent study by Loomis and Haefele , translated the impacts of air pollution associated with hydraulic fracturing operations into dollar terms using data from Colorado, where about one third of the state population lives on one of three major shale plays.
- They found that the economic cost of the impact of VOCs ranges from $353 to $509 per ton emitted.
2.3. Water impacts and issues
- The total volume of water used for hydraulic fracturing has also been at the center of much controversy because it has considerable impact on local communities in relation to its sourcing and transportation .
- This is because, even after hydraulic fracturing activities have ceased, large volumes of water contaminated with toxic and hazardous materials must be managed .
- They will also contain proppants and potentially radionuclides that would have to be filtered out [52,66].
- Regarding subsurface aquifer contamination, evidence suggests faulty well construction is the most likely cause of contamination.
- Vidic et al.  and Vengosh et al.  found little evidence of shallow-water chemical contamination; strong evidence of methane contamination; some evidence of deepwater–shallow-water aquifer mixing; and significant issues regarding produced water management and accidental spills .
2.4. Community impacts
- The visual and audible impacts of oil and gas extraction are among the most common complaints communities have regarding such development .
- The potential pathways to exposure to the chemicals involved in hydraulic fracturing are numerous and they include drinking water, skin contact, soil and food, and the atmosphere .
- Nevertheless, studies are suggestive of potential public health risks related to HVHF activity that warrants further careful evaluation.
- The study stressed that policymakers need to be prepared ahead of time in certain boomtown communities.
- Moreover, Haggerty et al.  explored this issue and found that while communities might benefit in the short-term from booms associated with hydraulic fracturing, communities with a long-term focus on oil and gas production experienced negative effects in terms of observed income, crime, and education.
2.5. Waste management considerations
- An exemption by the US EPA means that many forms of drilling waste are not considered hazardous; thus, they can be disposed of without special management, even though they might contain toxic materials.
- Oil and gas extraction operations produce large volumes of water together with the oil and gas .
- A study by Maloney and Yoxtheimer  quantified the waste produced from hydraulic fracturing operations in the state of Pennsylvania (US).
- The main constituents of NORM are uranium, thorium, radium, and their decay products .
2.6. Violations (Pennsylvania case study)
- To demonstrate the actual risks associated with operators’ practices, the authors analyzed data from Pennsylvania (US) .
- Only 14,291 violations have well geolocation data (county and township).
- A top-five environmental violation is worth US$7812/violation, with other violations being worth US$568 less (US$7244).
- This is followed by “failure to submit well records within 30 days of completion of drilling” (US$1476/violation); “failure to install, in a permanent manner, the permit number on a completed well” (US $1617/violation); and “failure to submit annual production report,” which has no cost (US$0/violation).
2.7. Economic impacts of price volatility on unconventional oil and gas development in the United States
- The unexpected collapse of crude oil prices in the second half of 2014 had a particularly high toll on the revenues of producers of unconventional oil and gas .
- Furthermore, a decline in oil prices generally deteriorates an economy's current account and precipitates currency depreciations .
- There is no evidence that operators’ incremental efficiencies have outpaced the current financial strain that many of them face across the market.
- The oil industry continues to face challenges, with under-investment leading to stagnating production and profit (which are of special concern for oil-exporting countries that rely heavily on the oil sector) .
3. Mexican vulnerabilities to shale development and best practices for their mitigation
- As is clear from this analysis, the processes associated with hydraulic fracturing have resulted in considerable damage both to the environment and to certain communities.
- In the US, the complex cost–benefit calculations related to the development of unconventional oil and gas have resulted in intense political debate over the extent to which government should regulate such operations .
- Nevertheless, public reaction to the impacts of this industry has been strong, leading to bans in some areas .
- Mexico has high vulnerability to the impacts of this industry because of its specific circumstances.
- Therefore, if development of Mexico's shale resources continues, the best practices identified in the US should be incorporated in regulatory instruments to promote impact mitigation and to advance environmental protection efforts through regulation.
3.1. Addressing land impacts through regulation
- Mexico is one of the most biodiverse countries in the world; however, more than half its forest resources have been lost already .
- Require operators to give immediate notice of any spill, fire, leak, or break to the appropriate agency followed by a full description of the event and the losses derived from it.
- Mexico's environment has been affected seriously by ecosystem degradation.
- Therefore, the following best practices should be considered when addressing restoration practices though regulation to ensure viable levels of ecosystem integrity are met after hydraulic fracturing operators exit the areas of extraction : Establish the developer's obligation for restoration.
- Determine the provisions for removal and filling of pits and infrastructure used to contain and store produced fluids and wastes, and the removal of all drilling supplies and equipment.
3.2. Addressing atmospheric impacts through regulation
- The city of Monterrey, located over the Sabinas Basin, and very close to the Burgos Basin, already suffers from environmental contingencies due to poor air quality .
- Establish monitoring mechanisms to ensure compliance with these set limits.
- Require the implementation of “green completions” to reduce emissions of VOCs and associated air pollutants from well completions, by requiring developers to capture gas at the wellhead immediately after well completion, instead of releasing it into the atmosphere or flaring it off.
- Recently, the practices of flaring and venting of gas have been increasing in Mexico.
3.3. Addressing water impacts through regulation
- The previously analyzed requirements for water by hydraulic fracturing operations, and the water pollution avenues such operations introduce, could affect the availability of an already strained resource.
- Require the company to perform regular water quality monitoring both in regional water bodies as well as in nearby communities.
- Provide free and open access data to the public.
- The following best practices should be considered to prevent subsurface contamination through well integrity [124–126].
- Require monitoring of each well that has had well-stimulation treatment to prevent and remedy any potential breaches.
3.4. Addressing waste management concerns through regulation
- The increase in seismic activity associated with hydraulic fracturing operations represents another source of danger for Mexico because of its inherent geological characteristics.
- Therefore, the following best practices regarding produced water management should be considered [129–131].
- Moreover, the requirement for monitoring of seismic activity derived from injection should be demanded to evaluate any potential impacts caused by earthquakes of relevant magnitude.
- The US exempts waste coming from down-hole that would have otherwise been generated by contact with the oil and gas production stream during the removal of produced water or other contaminants from the products.
- Establish hazardous waste management methods and provide for sanctions for improper management.
3.5. Enforcement recommendations
- Regulatory Violations can result in devastating impacts on the environment and considerable risk to the health and safety of workers and the surrounding communities.
- The Mexican maquiladora program, which spurred the industrialization of the US–Mexico border, has been deemed the main contributor to the high levels of pollution in cities on the Mexican border because of the loose enforcement of laws .
- Thus, the following points should be considered when determining enforcement measures [137,138].
- Appoint a sufficient number of inspectors to supervise and audit the practices of unconventional oil and gas developers.
- The record should be open access and readily available via the Internet.
3.6. Community engagement recommendations
- Public engagement is crucial in the path toward sustainable development of shale oil and gas resources.
- In the US, it has been found that individuals living in regions that depend economically on extractive industries are likely to support hydraulic fracturing despite its numerous environmental consequences .
- The following best practices should be explored when addressing community engagement and data disclosure through regulation [142,143].
- Promote proactive notification of project proposals to ensure adequate inclusion and reach via every possible channel, including leaflet drops, radio, television, social media (e.g., Facebook, Twitter), public displays, and house calls.
- Allow a period for information provision during which meetings should be held where operators and experts highlight the issues associated with the quality of life in areas of hydraulic fracturing development.
4. Concluding remarks
- In the US, hydraulic fracturing outcomes have been twofold.
- Some communities have experienced economic benefit by welcoming this industry, which has contributed to the now contested boomtown phenomenon.
- Enforced regulation could be the difference between building an economic success and damaging the environment further, while creating serious health threats for already vulnerable communities.
- The US’ shale development experience has served as a case study through which the authors have provided evidence of the panoply of environmental, social, and community impacts associated with hydraulic fracturing operations.
- Therefore, as Mexico moves forward with the exploitation of its unconventional oil and gas resources, it is of utmost importance to learn from the mistakes made in the US, which occurred primarily because of the unpreparedness of the regulators.
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Cites background from "Sustainability lessons from shale d..."
...8 Shale resource exploration efforts are underway in several countries, including Mexico (Castro-Alvarez et al., 2017), Algeria, Australia, Colombia, South Africa, and India (U.S. Energy Information Administration, 2015)....
...Shale resource exploration efforts are underway in several countries, including Mexico (Castro-Alvarez et al., 2017), Algeria, Australia, Colombia, South Africa, and India (U....
...Industry is using brackish groundwater resources in the Permian and Eagle Ford shale deposits (in West Texas and Texas-Mexico border regions, respectively; Scanlon et al., 2014)....
...These areas are found across the south central United States, Mexico, Argentina, northern Africa, South Africa, South Asia, and China....
...Previous studies have quantified water stress resulting from water withdrawals for hydraulic fracturing in some shale deposits in the United States, Argentina, China, and Mexico (e.g., Freyman, 2014; Galdeano et al., 2017; Guo et al., 2016; Mauter et al., 2014; Scanlon et al., 2014)....
"Sustainability lessons from shale d..." refers background in this paper
... found little evidence of shallow-water chemical contamination; strong evidence of methane contamination; some evidence of deepwater–shallow-water aquifer mixing; and significant issues regarding produced water management and accidental spills ....
"Sustainability lessons from shale d..." refers background in this paper
...However, this process requires significant energy and hence, it causes considerable expense ....
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Q1. What are the contributions in "Sustainability lessons from shale development in the united states for mexico and other emerging unconventional oil and gas developers" ?
This paper draws lessons from the recent ‘ shale boom ’ in the US, and it analyzes and summarizes the environmental, social, economic, and community impacts that Mexico should be aware of as its nascent shale industry develops. Furthermore, using the US as a case study, the authors argue that development of unconventional oil and gas resources in Mexico could lead to a short-term boom rather than to a dependable and sustainable long-term energy supply.