Fracking based on an exhaustible resource and the tradeoffs

Hydraulic fracking is a water intensive process. Water inputs for fracking are a function of the geology, the amount of recoverable resource such as oil or gas, the number and length of horizontal wellbores along with other factors. It is estimated that approximately 2 to 4 million gallons of water per well are required for wells in the Marcellus Shale region. The estimated amount of water per well in the Barnett Shale region in Texas and Oklahoma is about 5 million gallons per well. The amount of groundwater used for fracking in the humid eastern part of the United States is said to be trivial. But fracking in arid and semi-arid regions uses a significant amount of groundwater

The implementation of hydraulic fracturing is highly controversial and communities where fracking takes place are frequently much divided. The proponents of fracking seem to be people who have ties to the energy industry and those who derive royalty payments from fracking. This group emphasizes the economic benefit of more extensively accessible hydrocarbons and the creation of jobs. The opponents argue that there are serious environmental impacts associated with fracking and include the risk of contaminated groundwater, depleting freshwater, degrading air quality, noise pollution, and the consequential hazards to public health.

A review of existing studies suggests that little attention has been directed to the use of groundwater in fracking and how it may impact other uses of groundwater. The objective of this paper is to contribute to this void and is theoretical in nature. The theory of optimal regional development based on treating an aquifer as an exhaustible resource will be extended to include fracking activities. The theoretical model will consider nonenergy uses of groundwater as well as energy resource production derived from fracking. Additions to the energy resource stock are presented through the exploration process and are assumed to be a function of water inputs drawn from the aquifer. A general specification of environmental damages from fracking will be included. A set of socially optimal decision rules will be derived and analyzed from the perspective of developing policy guidelines for the use of groundwater resources for activities such as fracking.