Environmental Impacts of Shale Gas Development in China: Assessment and Regulation (SpringerBriefs in Geography) 9811604894, 9789811604898

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SPRINGER BRIEFS IN GEOGRAPHY

Meiyu Guo Jianliang Wang

Environmental Impacts of Shale Gas Development in China Assessment and Regulation

SpringerBriefs in Geography

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Meiyu Guo · Jianliang Wang

Environmental Impacts of Shale Gas Development in China Assessment and Regulation

Meiyu Guo Department of Geography Hong Kong Baptist University Hong Kong, China

Jianliang Wang School of Economics and Management China University of Petroleum Beijing, China

ISSN 2211-4165 ISSN 2211-4173 (electronic) SpringerBriefs in Geography ISBN 978-981-16-0489-8 ISBN 978-981-16-0490-4 (eBook) https://doi.org/10.1007/978-981-16-0490-4 © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Preface

This book offers a comprehensive analysis on the development of shale gas resources in China with a focus on the potential environmental impacts that may result from the development. China has the world’s largest shale gas resources, which it is keen to develop to alleviate air pollution and realize the projected transition to a low-carbon energy future. However, one significant obstacle standing between the ambition and reality is the potentially serious environmental impacts of shale gas production. This book provides a systematic assessment of these potential impacts, including risks on water contamination, ecological disruption due to the huge consumption of water, and GHG emissions. Valuable first-hand data have been collected from the authors’ fieldwork in Sichuan and Chongqing, in particular the latest in field information on China’s current shale gas operations. A set of models and methods have been developed to quantify the impacts. This book also gives you a deeper understanding of environmental regulatory management systems on shale gas production in China by examining whether the existing monitoring, reporting, and verification (MRV) systems and environmental regulations can effectively prevent adverse impacts from shale gas production. The book will address the needs of scholars, engineers, and students who are interested in the energy development and environmental risks in China by providing them with a comprehensive study that based on an unprecedented primary dataset of shale gas development in China. We thank all the interviewees in our fieldwork in the shale gas production fields in China and the United States for their kind help and sharing. We also thank Prof. Xu Yuan, who was Meiyu’s Ph.D. supervisor, for his valuable advice on the studies. The research was supported by the National Natural Science Foundation of China (Grant No. 71704150, 71874201 and 71503264). Hong Kong, China Beijing, China

Meiyu Guo Jianliang Wang

v

Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Research Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.1 Energy Mix in China and the U.S. . . . . . . . . . . . . . . . . . . . . . . 1.1.2 Environmental Impacts of the Energy Mix . . . . . . . . . . . . . . . 1.1.3 Natural Gas Resources and Consumption . . . . . . . . . . . . . . . . 1.1.4 Environmental Enforcement and Compliance . . . . . . . . . . . . 1.2 Research Objectives and Significance . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Organization of the Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 1 4 6 9 12 15 16

2 A Review of Environmental Risks in Shale Gas Development . . . . . . . 2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Shale Gas Development in the U.S. and China . . . . . . . . . . . . . . . . . . 2.3 Impacts of Shale Gas Development on Water Resources . . . . . . . . . . 2.3.1 Overview of Water Risks at Each Stage of Water Cycle in Shale Gas Development . . . . . . . . . . . . . . . . . . . . . . . 2.3.2 Water Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.3 Water Contamination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Other Potential Environmental Impacts . . . . . . . . . . . . . . . . . . . . . . . . 2.4.1 Air Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.2 Climate Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 Environmental Enforcement and Compliance . . . . . . . . . . . . . . . . . . . 2.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19 19 20 22

3 Assessment of Water Resource Constraints on Shale Gas Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Data and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Water Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.1 Fuling Field . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.2 Nationwide Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.3 Comparison with the United States . . . . . . . . . . . . . . . . . . . . .

22 25 29 33 33 33 34 35 36 43 43 45 46 46 55 59 vii

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Contents

3.4 Water Contamination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61 62 63

4 Assessment of GHG Emissions from Shale Gas Development . . . . . . . 4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Data and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.1 Hybrid LCI Model for Estimation of Energy Use and GHG Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.2 Model for EUR Estimation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.3 Target Geographical Area and Data Gathering . . . . . . . . . . . . 4.3 Energy Use Per Well . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 GHG Emissions Per Well . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67 67 69

5 Environmental Regulatory Systems of Shale Gas Development . . . . . 5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Data and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Water Contamination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.1 Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.2 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.3 Verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.4 Coverage and Implementability . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Water Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 Methane Leakage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.1 Monitoring, Reporting and Verification . . . . . . . . . . . . . . . . . . 5.5.2 Coverage and Implementability . . . . . . . . . . . . . . . . . . . . . . . . 5.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

81 81 82 87 88 89 90 91 91 93 94 95 96 97

69 71 72 73 74 77 78

6 Conclusion and Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 6.1 Major Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 6.2 Implications for China’s Environmental Enforcement of Shale Gas Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 6.3 Limitations and Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Chapter 1

Introduction

Abstract This chapter introduces research background of the study on environmental impacts of shale gas development in the U.S. and China. Potential environmental risks, including air pollution, carbon emission, water consumption and water contamination, are identified. Objectives, significance, and the organization of the book are introduced. Keywords Shale gas development · Environmental risks · Energy mix · Environmental compliance and enforcement

1.1 Research Background 1.1.1 Energy Mix in China and the U.S. During the past 10 years, the global consumption of primary energy has grown by 20.94%, reaching 583.9 exajoules in 2019 (Fig. 1.1) (BP 2020). As the top two global energy consumers, the U.S. and China combined accounted for more than 40% of the world’s energy consumption in 2019. In 2010, with its rapidly growing economy, China surpassed the U.S. as the largest global energy consumer. Moreover, in 2014, U.S. energy consumption was 1.96% lower than it had been ten years earlier, mainly as a result of improved energy efficiency and the effects of the latest economic recession (U.S. Energy Information Administration 2014). Worldwide, the primary energy consumption of fossil fuels dominates the energy mix, with oil, natural gas and coal accounting for 84.32% of the total global energy use in 2019 (Table 1.1). The contributions of nuclear and hydro energy were 4.27 and 6.45%, respectively, while renewable energies including wind, geothermal, solar, biomass and waste accounted for 4.96%. Although the total energy consumption in the U.S. has changed little during the past decade, the structure of the energy mix has changed significantly. Compared to 2009, the energy consumption of coal in the U.S. was 45.62% lower in 2019, while the consumption of oil and natural gas increased by 4.28 and 23.65%, respectively (Fig. 1.2). Although coal and oil still account for a large share of the energy consumption in the U.S., some of that share has clearly been lost to natural gas and non-hydroelectric renewables. The energy consumption © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Guo and J. Wang, Environmental Impacts of Shale Gas Development in China, SpringerBriefs in Geography, https://doi.org/10.1007/978-981-16-0490-4_1

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Fig. 1.1 Primary energy consumption: U.S. and China, 2009–2019 (Data source BP Statistical Review of World Energy, 2020)

Table 1.1 Share of energy consumption by fuel type in 2019

Primary energy consumption (%) U.S.

China

World

Oil

39.08%

19.69%

33.05%

Natural gas

32.19%

7.81%

24.23%

Coal

11.98%

57.64%

27.04%

Nuclear

8.03%

2.19%

4.27%

Hydro

2.56%

7.99%

6.45%

Renewables Total (Exajoules)

6.16% 94.65

4.68% 141.70

4.96% 583.9

Data source BP Statistical review of world energy 2020

structure usually depends on the available energy resources and regional prices. In this case, the change in the U.S. energy mix has largely been in response to the rapid increase in the domestic production of natural gas due to the booming development of unconventional gas. In comparison, China’s consumable energy is largely supplied by coal (57.64%) (Table 1.1). China is the world’s top coal consumer and accounts for almost 52% of global coal consumption (U.S. Energy Information Administration 2020). The second-largest energy source in China is oil, which accounted for 19.70% of the country’s total energy consumption in 2019. As a result of the rising consumption of oil, China surpassed the U.S. as the world’s largest net importer of oil at the end of 2013 (U.S. Energy Information Administration 2015b). During the past decade, although China made efforts to diversify its energy supplies by increasing the use of oil, natural gas, hydroelectric, nuclear and renewables, coal still had the largest share (Fig. 1.2). However, the growth in coal consumption has slowed significantly, while the consumption of natural gas has continued to increase. Between 2009 and 2019, China’s natural gas consumption increased by roughly three times to 11.06 exajoules (Fig. 1.2), although gas still accounts for only 7.81% of total consumption. Although U.S. energy consumption is projected to grow at a modest rate through to 2040, most of this growth is predicted to be in the consumption of natural gas

1.1 Research Background

3

Fig. 1.2 Primary energy consumption by fuel type: U.S. China (2009–2019) (Data source BP Statistical Review of World Energy, 2010–2020)

and renewable energy (U.S. Energy Information Administration 2014). The shares of these two energy resources are predicted to increase by 2%, respectively, the share of oil consumption to decrease by about 3%, while almost no change in the share of other energy consumption is expected in the energy mix (U.S. Energy Information Administration 2014). According to China’s Energy Development Strategy Action Plan (2014–2020), the Chinese government plans to cap coal use at less than 62% of total primary energy consumption by 2020, while the figure was 66.03% in 2014 (another estimated value, the figure was 64.2% according to China’s National Energy Agency). In an effort to reduce the heavy air pollution and CO2 emissions, China is seeking to raise the share of total energy consumption supplied by renewable sources to 15% by 2020. Priority has been given to developing hydro, wind, solar and biomass energy resources through large investments in China. Hydroelectricity has become

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1 Introduction

China’s key source of renewable energy generation, with China becoming the largest producer of hydroelectric power in 2013 (U.S. Energy Information Administration 2015b). However, the increasing environmental concerns relating to the construction of hydropower projects present new challenges for China in increasing its installed hydroelectric capacity. In addition, the Chinese government set a target to raise natural gas consumption from 5.62% of the energy mix in 2014 to at least 10% in 2020 (The State Council 2014) to ease the country’s dependence on coal. Moreover, China plans to rapidly increase the extraction of conventional natural gas, and at the same time, focus on the development of unconventional gas resources, particularly shale gas and coal-bed methane (The State Council 2014). Although the absolute amount of China’s coal consumption is expected to increase as the country’s total energy consumption rises, improvements in energy efficiency and China’s policies promoting the use of other energy sources are likely to lead to a decrease in the share of coal.

1.1.2 Environmental Impacts of the Energy Mix 1.1.2.1

Air Pollution and Carbon Emissions

The potential for environmental effects relating to factors such as air pollution, water contamination and climate change exists throughout the overall life cycle of different types of energy, from extraction to end use. Nonetheless, because of the different natures of these energy resources, the emissions from the production and consumption processes of the fuels greatly vary. For example, electricity generation demands significant primary energy resources. At the power plant, the burning of coal and oil can produce sulfur dioxide (SO2 ), nitrogen oxides (NOx ), carbon dioxide (CO2 ) and mercury compounds, which can lead to serious air pollution without proper emission controls. The amounts of the air pollutant compounds vary with the type and quality of the coal and oil that is burned. Compared to coal-fired and oil-fired generation, power plants that burn natural gas also produce NOx and CO2 , but in lower quantities, and emit negligible sulfur dioxide and mercury compounds (Table 1.2) (U.S. Environmental Protection Agency 2014a). Therefore, natural gas is considered to Table 1.2 Average emission rates for fossil-fuel generation in the U.S. (lbs/MWh)

Coal SO2

13

Oil

Natural gas

12

0.1

NOx

6

4

1.7

CO2

2249

1672

1135.0

Data source U.S. Environmental Protection Agency Emissions and Generated Resource Integrated Database (eGRID), http://www. epa.gov/cleanenergy/energy-resources/egrid/index.html

1.1 Research Background

5

Fig. 1.3 CO2 emissions from energy consumption: U.S. and China, 2005–2017 (Data source U.S. Energy Information Administration, International Energy Statistics, http://www.eia. gov/cfapps/ipdbproject/ied index3.cfm?tid=90&pid= 44&aid=8)

be a relatively cleaner energy source for electricity generation among the traditional fossil fuels. The mining, extraction, production, treatment and transport of fossil fuels generate additional air emissions. The venting and leakage of methane, which is a powerful greenhouse gas affecting the global climate, can also occur during these processes. The increasing consumption of fossil fuels, especially coal, is considered to be one of the most important causes of air pollution in China. Official data from China’s Meteorological Administration (CMA) show that China had the largest average number of smoggy days in 2013 since 1961, reaching a 52-year high (ChinaDaily 2013). The air pollution problem has generated considerable public discontent and become one of the most urgent issues challenging the future development of China. The Chinese government is aggressively trying to address the problem of air pollution. One of the major policy directions is to reduce the reliance on coal by substituting it with relatively cleaner energy resources, such as natural gas and renewables, in the country’s energy mix. The government plans to spend about 0.49 trillion RMB (about USD 78 billion) in developing these cleaner energy resources (Burg 2015). A number of empirical studies have demonstrated the significant effects of changes in the energy mix on air emissions (Selden et al. 1999; Bruvoll and Medin 2003). In a study on the reduction in U.S. air pollution emissions between 1970 and 1990, (Selden et al. 1999) found that changes in the energy mix had significant effects in changing the emissions of major air pollutants; for example, the shift toward nuclear-generated electricity largely helped to reduce the emissions of particulate matter (PM), SO2 , NOx , non-methane volatile organic compounds (VOC), carbon monoxide (CO) and lead (Pb). Hence, the emphasis on increasing the energy share of natural gas and renewables in China’s Energy Development Strategy Action Plan (2014–2020) is likely to contribute to improving the poor air quality in China. In addition to air pollution, another tough issue confronting the world energy consumption giants, China and the U.S., is the pressure to reduce CO2 emissions. The combustion of fossil fuels for electricity generation, transportation, industry and other human activities is the main source of CO2 emissions. Although energyrelated CO2 emissions have declined slightly in the U.S in the last several years, they still accounted for about 15% of the total global emissions in 2017 (Fig. 1.3). Furthermore, China’s CO2 emissions have risen together with the country’s rapid increase in energy consumption (Figs. 1.1 and 1.3), and accounted for about 28% of

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1 Introduction

the world total emissions in 2017 (U.S. Energy Information Administration 2015b). Sustained emissions of CO2 and other greenhouse gases contribute to climate change by increasing the CO2 levels in the atmosphere. Global climate change is imposing huge costs on society, for example, by increasing the prevalence of natural disasters and threatening coastal areas with rising sea levels. For the future reduction of global greenhouse gases, China has committed to peak its CO2 emissions by 2030 and achieve carbon neutral by 2060, and the U.S. promised to cut its emissions by 17% by 2020 and 28% by 2025. In addition to the efforts to increase efficiency and the use of renewable energy, China and the U.S. have considered cutting carbon emissions by using more lower-carbon natural gas resources. For example, according to the U.S. Environmental Protection Agency Clean Power Plan announced in 2015, some states will try to meet their carbon emission targets by swapping coal-fired power plants with lower-carbon natural gas facilities. The Chinese government has also set a target to raise the share of natural gas to at least 10% of total energy consumption in 2020 to help realize the carbon peak target for 2030 (The State Council 2014) and carbon neutral target for 2060.

1.1.2.2

Water Consumption and Pollution

Energy production usually uses large amounts of fresh water and can have negative effects on local water availability and the ecological environment. In China, energy production is responsible for 61.4 billion m3 of water withdrawals, 10.8 billion m3 of water consumption, and 5.0 billion m3 of wastewater discharges, which account for about 12.3, 4.1 and 8.3% of the country’s totals, respectively (Zhang and Anadon 2013). The environmental effects of this significant energy-related water use are distributed unevenly in the spatial context, such that the arid regions in north and northwest China bear almost all of the environmental damage caused by the consumption of water for energy production (Zhang and Anadon 2013). Given China’s existing water scarcity and water quality problems, the effect of the increasing energy demand and production on water resources is a vital concern requiring greater investigation. In addition to the effects of water consumption, pollutants from each stage of the energy production process may enter the surface water and groundwater resources. For example, acidic mine discharge (AMD), a widespread environmental problem associated with coal mining operations, has polluted at least 5,000 km of streams in the U.S. state of Pennsylvania (Zhengfu et al. 2010). The improper disposal of the water used in oil and gas extraction and the associated production waste is also a serious pollution source threatening the quality of the local water supplies.

1.1.3 Natural Gas Resources and Consumption Natural gas is a fossil fuel consisting largely of methane (>85%) (Speight 2014). It originates from the layers of buried plants and animals that have been exposed to

1.1 Research Background

7

heat and pressure underneath thousands of meters of soil and rock over thousands of years (U.S. Environmental Protection Agency 2013). According to the U.S. Energy Information Administration (2020), in 2019, the proven reserves of natural gas were 13.45 trillion cubic meters (tcm) in the U.S. and 6.03 tcm in China, which accounted for about 6.62 and 2.97% of the world’s total reserves, respectively. However, most of the world’s natural gas reserves are located in the Middle East and Russia, which have over 39 and 23% of total world reserves, respectively (U.S. Energy Information Administration 2015b). Natural gas resources are generally divided into two categories, conventional and unconventional, based on the permeability levels of the reservoirs (Mokhatab and Poe 2012). In reservoirs with higher permeability, conventional gas is usually trapped within the pore spaces of the overlying rock units and can easily flow into the extraction well through the pores in the rock (Speight 2013). Shale gas belongs in the unconventional category, with permeability of less than 1 millidarcies (mD), and hence usually cannot be extracted by conventional methods (Speight 2013). The U.S. Energy Information Administration (2013d) has estimated China’s technically recoverable shale gas resources at 31.6 tcm, higher than that of the U.S., while Ministry of Land and Resources of China (2012) estimated the resources at 25.1 tcm. In addition to shale gas, unconventional natural gas includes tight gas and coal-bed methane. As a vital component of the world’s energy supply, natural gas is considered to have many advantages over other fuels. For example, as an energy source for electricity generation, natural gas is considered to be much cleaner, more flexible and, in some cases, cheaper than other energy sources. For each unit of electric power produced in the U.S., the emissions of air pollutants from natural gas plants are much lower than those of coal-fired and oil-fired plants (Table 1.2). Considering the effects on climate change and water resources, natural gas is also much “cleaner;” having the lowest emission rate of CO2 among fossil fuels and much lower demands for water resources than other fossil fuel, biomass, hydro and nuclear power plants in China (Figs. 1.4 and 1.5) (Feng et al. 2014). Furthermore, gas-fired plants are more technically and economically flexible, and hence can react quickly to demand peaks, which makes natural gas an ideal resource to twin with renewable options such as wind power (Macmillan et al. 2013). In addition, according to the U.S. Energy Information Administration, natural gas-fired plants have much lower average levelized per-kilowatt-hour costs, including fuel costs, than coal-fired plants and most of the generating technologies for renewable resources (Fig. 1.6). Hence, natural gas is seen as a good resource for electricity generation considering these environmental, operational and economic advantages. Besides electricity generation, which consumed 40% of the total primary energy in the U.S. in 2012 (U.S. Energy Information Administration 2013c), other essential sectors consume significant amounts of natural gas, such as the industrial, transportation, residential and commercial sectors. Of these sectors, the residential and commercial sectors consumed the largest percentage of natural gas (75%), while

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1 Introduction

Fig. 1.4 Life-cycle CO2 emissions of eight power generation technologies in China: 2000–2010 (Source Feng et al. 2014)

Fig. 1.5 Life-cycle water requirements for eight power generation technologies in China: 2000– 2010 (Source Feng et al. 2014)

1.1 Research Background

9

Fig. 1.6 U.S. average levelized costs (2013 $/MWh) for plants entering service in 2020 (Data source U.S. Energy Information Administration, Annual Energy Outlook 2015, http://www.eia. gov/forecasts/aeo/electricity_generation.cfm; Natural Gas-fired 1: Conventional Combined Cycle; Natural Gas-fired 2: Advanced Combined Cycle; Natural Gas-fired 3: Advanced CC with CCS)

natural gas only accounted for 3% of the energy consumption in the transportation sector in 2012 (U.S. Energy Information Administration 2013c). As an important energy source in all sectors of the economy in the U.S. and China, the supply of natural gas affects the world energy market. Maintaining an adequate supply of this critical resource is essential to ensure energy security in both countries. As a result of the remarkable growth in shale gas production, the total natural gas production in the U.S. is expected to exceed consumption in the early 2020s. Along with a projected relatively low price, this will allow the U.S. to transition from being a net importer to a net exporter of natural gas, and will enhance its energy security in the complicated international energy market (U.S. Energy Information Administration 2012). In China, although natural gas comprised only 5.6% of the total primary energy consumption in 2014 (Table 1.1), the government continues to makes great efforts in upstream development through heavy investment and seeking more import opportunities. Although the level of domestic natural gas production cannot meet the rising demand in China, imports have become an increasingly significant part of China’s gas supply. Natural gas imports reached 45% of China’s total demand in 2019, and they are predicted to continue to grow because of China’s increasing demand for clean energy (U.S. Energy Information Administration 2015a). All of these factors raise concerns about China’s energy security.

1.1.4 Environmental Enforcement and Compliance 1.1.4.1

Environmental Performance

The latest 2014 Environmental Performance Index (EPI) ranks how well 178 countries in the world perform on high-priority environmental issues relating to human health and the protection of ecosystems (YCELP and CIESIN 2015). The top two

10

1 Introduction

countries with the largest gross domestic product (GDP) in 2014, the U.S. and China, ranked only 33 and 118, respectively. Detailed information on the indicators of the EPI for the two countries is presented in Table 1.3. Although both countries demonstrated progress in their environmental performance compared to the results 10 years earlier, they were still lagging behind the world median for some important environmental issues. For example, the U.S. scored the relatively low for agriculture, forests and fisheries, and China performed poorly in agriculture, air quality, water and sanitation. For air quality, China’s score was third-to-last and only a little higher than the scores of Nepal and Bangladesh (YCELP and CIESIN 2015). In addition to their poor performance on environmental issues, the actual emissions of these two large countries are of concern. Taking air pollution as an example, the total national emissions of the two major air pollutants SO2 and NOx , were 4.81 × 106 and 12.64 × 106 tons in 2014 in the U.S. (U.S. Environmental Protection Agency 2014b), while the figures were 19.74 × 106 and 20.78 × 106 tons in China, respectively (Ministry of Environmental Protection of China 2017). Considering the GDP of the two countries in the year 2011, the emission intensities of SO2 and NOx in China were more than seven and three times, respectively, the emission intensities of the U.S. (The World Bank 2015). China has become the world’s leading emitter of many pollutants. China’s serious environmental problems reflect a lack of effective environmental protection, and public health problems have contributed to a sense of dissatisfaction among an increasing number of Chinese people. However, if the state enters into agreements with the U.S. Environmental Protection Agency (EPA) or acts as the EPA’s agent, its federal powers will be limited (Paddock 1990). Table 1.3 Environmental performance index rankings: U.S. and China, 2014 Indicators

U.S.

China

Score

Rank

67.52

33

Health impacts

95.33

Air quality

96.41

Water and sanitation

86.48

Water resources

63.66

32

Agriculture

61.53

109

Forests

14.35

107

3.34

Biodiversity and habitat Climate and energy

Overall

Fisheries

10-year change (%)

Score

Rank

2.23

43.00

118

10-year change (%)

35

3.09

76.23

80

3.22

38

10.36

18.81

176

−14.15

36

1.21

33.15

109

59.07

18.18

67

19.96

33.85

166

25.34

80

96

−73.53

14.68

89

63.35

86

0

66.63

76

56.45

49

65.16

21

2.6

−22.31 −20 0.66

Data source Yale Center for Environmental Law and Policy (YCELP) and the Center for International Earth Science Information Network (CIESIN) at Columbia University, 2015, http:// epi.yale.edu/epi/country-rankings

1.1 Research Background

1.1.4.2

11

Rule of Law Status

A country’s rule of law and its implementation are the cornerstones of effective environmental protection. In China, the Environmental Protection Law (EPL) is the main national environmental legislative framework, which was amended by the National People’s Congress (NPC) and took effect on January 1, 2015 (The National People’s Congress of the People’s Republic of China 2014). The EPL covers a broad spectrum of environmental issues and provides basic principles for preventive and protective measures that address air, water, soil, noise, light, solid waste, chemical and vehicle pollution, and includes systems for environmental management, monitoring and enforcement (Ministry of Environmental Protection of China 2015). Under the institutional framework, the Ministry of Environmental Protection (MEP) coordinates environmental protection work and develops national environmental policies and regulations, while the local Environmental Protection Bureaus issue local environment-related rules that are based on national laws and regulations and are responsible for their implementation and management under the MEP’s jurisdiction. The new EPL is perceived to be the most progressive and stringent law in China’s history of environmental protection (Zhang and Cao 2015) with significant improvements that are mainly represented through: (1) harsher penalties for environmental non-compliance: for example, a new “daily fine” penalty system was established to calculate the fines for violators, under which the penalty equals the product of the violation fee times the number of days until the correction action is completed; (2) new requirements for local governments, in that the new EPL emphasizes that local governments’ performance evaluations take into account the attainment of environmental protection targets; and (3) more stringent punishment of government officials, such that unlawful acts, such as covering up violations and granting permits where the criteria are not met, are subject to heavier penalties (The National People’s Congress of the People’s Republic of China 2014). Although the new EPL has increased the cost of environmental violations for offenders and places more responsibility and accountability on local governments and enforcement agencies, it still has a number of major shortcomings that have been discussed in literature: (1) the law contains highly general statements that lack sufficient guidance on procedures and specific goals (Beyer 2006); (2) the governance structure is fragmented and overlapping (Zhang and Cao 2015); and (3) insufficient authority is given to the local environmental protection bureaus (Zhang and Cao 2015). In the U.S., Congress has passed a number of environment-related laws, such as the Clean Air Act (CAA) and Clean Water Act (CWA), which grant the EPA the authority to protect the environment and public health, and provide more detailed regulations on a federal level. State and local governments, and other regulated entities are mandatorily required to follow the regulations. The EPA is responsible for enforcement activities that hold the regulated entities legally accountable for environmental violations. At the same time, most federal environmental laws authorize states to implement plans that are outlined in the federal laws. Specific environmental issues, depending on their impact and characteristics, can be addressed at the federal level, the state level or regulated by both.

12

1.1.4.3

1 Introduction

Enforcement and Compliance Status

Although the Chinese government has constructed an expansive environmental legal regime over the past three decades, in practice, the implementation and enforcement of laws and regulations has been notoriously weak (He et al. 2013; Wang 2013). The poor environmental quality in China reveals the implementation deficit of China’s existing regulatory regime. The EPL requires all provinces to enforce the same environmental regulations promulgated by the central government. However, because the actual performance of local governments in enforcing the regulations varies widely (Beyer 2006), the implementation of the environmental regulations has not been as successful as their formulation (Beyer 2006). The local environmental protection authorities, which are the main exercisers of environmental governance in China, usually lack the capacity to effectively implement the governance work owing to staffing and financial limitations. In addition, when facing conflicts of interest, the do not have sufficient authority to impose severe penalties or effective actions on polluting companies. As a result, the most progressive and stringent legislation in China’s history of environmental protection may still not be able to resolve the serious pollution problems in China given the lack of effective enforcement, especially at the local level.

1.2 Research Objectives and Significance Thanks to the breakthroughs in horizontal drilling and hydraulic fracturing (or “fracking”), shale gas, an unconventional natural gas that is rapidly gaining prominence, promises to provide a clean, affordable, abundant and more secure fuel source, thereby greatly contributing to the vision of a “Golden Age of Gas” (International Energy Agency 2011). In the U.S., a shale gas revolution is currently contributing to reducing coal consumption and CO2 emissions, enhancing energy security, suppressing energy prices and improving the competitiveness of the manufacturing sector (U.S. Environmental Protection Agency 2000; U.S. Energy Information Administration 2013a, b; World Bank 2013; U.S. Energy Information Administration 2012). Influenced by the success of the recent shale gas boom in the U.S., the Chinese government has set an annual production goal of at least 30 bcm for 2020 (The State Council 2014) and established a series of policies to support and promote the development of shale gas. A production subsidy of 0.4 RMB/m3 was implemented between 2012 and 2015, declining to 0.3 RMB/m3 between 2016 and 2018 and 0.2 RMB/m3 between 2019 and 2020 (Ministry of Finance and National Energy Administration 2012). These policies also include waivers on price controls and fees, and reclassify shale gas as an independent mineral resource, which allows for development policies that are distinct from those for conventional gas (Sandolow et al. 2014). Two rounds of auctions for exploration rights were held in 2011 and 2012. By April 2014, total investment had reached more than USD 2.42 billion and

1.2 Research Objectives and Significance

13

322 exploration wells had been drilled, including 96 with horizontal sections (Pang and Bao 2014). Although China’s shale gas development has progressed more slowly than anticipated and remains at an early exploratory stage, there has been considerable progress at a number of favorable fields in the Sichuan Basin of southwest China (Guo 2014). These are led by the Fuling field, which currently includes roughly one third of the total existing horizontal wells in China and is the first to achieve large-scale production. In 2014, Fuling field produced 1.08 bcm of shale gas, which accounted for 73.3% of China’s total production (Fuling District Government 2015). However, as examined in greater detail in subsequent chapters, shale gas development can have potentially serious environmental impacts. In both the U.S. and China, serious concerns have been raised about the environmental effects of drilling and fracking, which are critical factors in shale gas exploration, mainly in terms of water resources, pollution and climate change. The recent application of hydraulic fracturing has brought new challenges and added to the difficulty in addressing the environmental effects of unconventional gas extraction, compared to conventional gas production. Environmental constraints have also restrained further shale gas development in some countries (The Economist 2011), such as France, which has insisted that it will not reconsider its shale gas exploration ban until further environmental research is carried out (Agence France Presse 2012). Moreover, as indicated by the demonstrations by environmental and public health NGOs, “fracking” projects and shale gas development in general have caused wide public concern in many parts of the world (World Wide Fund for Nature 2012; Sierra Club Atlantic 2012; Friends of the Earch Europe 2012). Some of the anti-fracking demonstrations and protests have successfully shut down fracking operations and made governments delay their local development plans for shale gas (UTNE Reader 2012; March for Climate Leadership 2015). Hence, the environmental effects of shale gas exploration are a decisive factor in shaping the landscape of world shale gas development. In order to ensure that the development of shale gas resources can be achieved without having any serious impacts on the environment, two different strategies are put forward: (i) wait until large-scale development before launching serious examination on related environmental regulations, which for example, was taken by the Government of France, and (ii) prevent the prospective environmental damage through studying relevant, despite being patchy, evidences and identifying potential weakness. The first strategy may provide with implications for the future development of shale gas resources based on the comprehensive examination on related regulations from a more academic perspective; while the second one may provide with suggestions to improve the current policies based on the studies of relevant evidences and experiences from a more practical perspective. The former one may help with the reduction of environmental risks of large-scale development, but usually takes time; while the latter one may buy time for the development of shale gas resources, but takes on more risk of serious environmental problems. Considering China’s shale gas development plan and the current environmental problems, the appropriate employment of these two strategies in combination can be an effective way to address the potential problems.

14

1 Introduction

Proper technologies could address many, if not all, of these environmental concerns. For example, a good understanding of the local geology and the proper use of micro-seismic techniques to monitor fractures can help to minimize the risk of fracking fluid leaking into aquifers (International Energy Agency 2012). However, these controlling technologies increase the overall drilling costs by about 7% (International Energy Agency 2012). Although the costs will not change the fundamental calculations on the economy of shale gas, they raise serious challenges for the environmental regulatory systems. The environmental impacts of the new fracking technologies are more difficult to address than those of conventional gas extraction (International Energy Agency 2012). Considering these potential problems, whether the existing regulations are able to provide complete and proper guidance for shale gas operators and regulators to ensure that the operations do not have negative effects on the environment is an important question. In addition, the higher the compliance costs, the greater the enforcement challenges (Becker 1968). These additional compliance costs are likely to serve as disincentives for companies to follow the regulations, which in turn would make it more difficult for regulators to enforce the environmental regulations. Furthermore, considering the rapid development of shale gas, whether the local environmental authorities have sufficient capacity to conduct effective inspections and properly punish violations is another major challenge to the environmental regulatory systems in both the U.S. and China. Despite the importance of this issue, insufficient research has addressed the problems associated with shale gas production. Hence, the initial aim of this thesis is assessing the potential environmental effects of shale gas development. Then, the question of whether the existing environmental enforcement systems for shale gas development can effectively address the environmental effects is examined, with particular focus on the qualitative evaluation of the regulation documents and regulatory systems. This question is addressed based on an original investigation and assessment of the potential environmental effects of shale gas development in China. The experience in the U.S. can be instructive and provide implications for China in overcoming the environmental challenges associated with the large-scale development of the shale gas industry. Although numerous studies have examined the development of the shale gas industry in the U.S., little research has investigated the environmental regulatory challenges of shale gas development, especially in China. As the above theoretical framework has demonstrated, the environmental performance of shale gas operators is shaped by the effectiveness of relevant regulations, in terms of both design and implementation, that are based on well-understood potential environmental risks. This study aims to achieve three main objectives: (1) To evaluate the potential environmental impacts of the planned shale gas development on the water resources and greenhouse gas (GHG) emissions in China, especially focusing on the geographical water resource constraints and with reference to the situation in the U.S.; (2) To systematically evaluate the environmental regulatory frameworks for shale gas operations, particularly the institution building and regulation documents for monitoring, reporting and verification.

1.2 Research Objectives and Significance

15

Based on the achievement of these two research objectives, their implications for improving the environmental enforcement and compliance in the U.S. shale gas industry are examined, and the appropriate systems for China to address the environmental challenges of the ambitious large-scale development of shale gas are explored. Although numerous studies have examined the environmental risks of shale gas development, most focus on the U.S. context. Few studies have examined shale gas development in other countries, usually due to the unavailability of data on the current shale gas operations. Based on the analysis of the U.S. experience, this book aims to fill this gap in the literature by comprehensively examining the environmental effects of the shale gas development and corresponding environmental regulatory system in China, which is reported to possess the largest shale gas resource in the world (U.S. Energy Information Administration 2013d). The authors conducted more than three field studies of the shale gas well sites in China’s Sichuan shale gas basin and one study of the U.S. Marcellus shale play during 2013–2017, and collected first-hand information on the environmental operations and enforcement. The unprecedented dataset collected during these field trips provides the basis for the detailed and original analysis presented in this book.

1.3 Organization of the Book This book is divided into six chapters. This chapter and Chapter 2 provide detailed accounts of the research background, research significance and literature review. Chapter 3 presents an assessment of the potential effects of shale gas development on the water resources. Chapter 4 evaluates the impacts of shale gas development on greenhouse gas (GHG) emissions. Chapter 5 examines the environmental regulations for shale gas development in the U.S. and China, with particular focus on the monitoring, reporting and verification (MRV) systems. Chapter 6 summarizes the main finding of the book, examines the implications for China’s environmental management of shale gas development and briefly discusses potential research topics. The specific and detailed descriptions of each chapter are shown as follows: Following the introductory chapter, Chapter 2 reviews the literature on environmental risks and management studies in the shale gas industry. The chapter begins by elaborating the development of shale gas in the U.S. and China. Next, the results of studies on the potential environmental effects of shale gas development are summarized. Finally, the extant research on environmental enforcement is reviewed and the potential gaps in the literature are identified. Chapter 3 presents an original assessment of the potential effects on the environment, particularly water resources, induced by the development of shale gas. Based on the analysis of the U.S. water consumption for shale gas development, this chapter estimates the water consumption of China’s shale gas production through 2020 under three scenarios, and evaluates the potential effects of water consumption and the water contamination risks at both the local and national levels.

16

1 Introduction

Chapter 4 develops a hybrid life cycle inventory (LCI) model to estimate the energy use and greenhouse gas (GHG) emissions of China’s shale gas development, and presents an energy return on investment (EROI) analysis for estimating its net energy return. Chapter 5 constructs an analytical framework, focusing on the coverage and implementability of the MRV systems, to evaluate the probability of detecting noncompliance in China and the U.S. on three prominent environmental impacts of shale gas development, namely water contamination, water consumption and methane leakage. A comparative analysis approach is used to gain a deeper understanding of the environmental regulation systems for shale gas development in the U.S. and China. Chapter 6 summarizes the main findings of the thesis, discusses the major policy implications and indicates the potential directions for future research.

References Agence France Presse (2012) France maintains shale gas ban: environment minister, 20 July. Agence France Presse. Retrieved from http://www.energy-daily.com/reports/France_maintains_ shale_gas_ban_environment_minister_999.html Becker GS (1968) Crime and punishment: an economic approach. J Polit Econ 76(2):169–217 Beyer S (2006) Environmental law and policy in the People’s Republic of China. Chin J Int Law 5(1):185–211 BP (2020) Statistical review of world energy. Retrieved from https://www.bp.com/content/dam/ bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review2020-full-report.pdf Bruvoll A, Medin H (2003) Factors behind the environmental Kuznets curve: a decomposition of the changes in air pollution. Environ Resour Econ 24(1):27–48 Burg G (2015) Coal’s continuing dominance in Chinese energy supply makes clean-air campaign an uphill battle, Insight & Opinion. South China Morning Post, 25 April. Retrieved from http://www.scmp.com/comment/insight-opinion/article/1496542/coals-continuing-domina nce-chinese-energy-supply-makes-clean ChinaDaily. (2013). China’s smoggy days at 52-year high. Retrieved from http://usa.chinadaily. com.cn/china/2013-11/01/content_17075375.htm Feng K, Hubacek K, Siu YL, Li X (2014) The energy and water nexus in Chinese electricity production: a hybrid life cycle analysis. Renew Sustain Energy Rev 39:342–355 Friends of the Earch Europe (2012) Civil society groups call on member states to suspend existing ‘fracking’ projects and ban new ones. Retrieved from Friends of the Earch Europe website. http:// www.foeeurope.org/shale-gas-dangerous-experiment-240412 Fuling District Government (2015) Fuling field’s shale gas production accounts for 73.3% of China’s total production. Retrieved from http://www.fl.gov.cn/Cn/Common/news_view.asp?lmdm=008 005&id=6098650 Guo A (2014) China on course to exceed 2015 shale target with fuling find. Retrieved from Hong Kong. http://www.bloomberg.com/news/2014-03-11/china-on-course-to-exceed2015-shale-gas-target-with-fuling-find.html He G, Zhang L, Mol AP, Lu Y, Liu J (2013) Revising China’s environmental law. Science 341(6142):133 International Energy Agency (2011) Are we entering a golden age of gas? Retrieved from Paris, France International Energy Agency (2012) Golden rules for a golden age of gas. Retrieved from Paris

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Macmillan S, Antonyuk A, Schwind H (2013) Gas to coal competition in the US power sector. International Energy Agency, Insights Series, 1–31 March for Climate Leadership (2015) 8,000 Californians March in largest anti-fracking demonstration in U.S. history. Retrieved from http://marchforclimateleadership.org/media/ Ministry of Environmental Protection of China (2015) Institution responsibility. Retrieved from http://www.mep.gov.cn/zhxx/jgzn/ Ministry of Environmental Protection of China (2017) National environmental statistical report 2017 Ministry of Finance and National Energy Administration (2012) A notice on subsidy policy for shale gas development and production. Retrieved from http://www.gov.cn/zwgk/2012-11/05/con tent_2257957.htm Ministry of Land and Resources of China (2012) National shale gas resource potential investigation, evaluation and favorable area optimization. Beijing Mokhatab S, Poe WA (2012) Handbook of natural gas transmission and processing. Gulf Professional Publishing Paddock LC (1990) The federal and state roles in environmental enforcement: a proposal for a more effective and more efficient relationship. Harv Environ Law Rev, 14 Pang F, Bao S (2014) The progress and cost of shale gas exploration and development. Paper presented at the third China shale gas conference 2014, Chongqing Sandolow D, Wu J, Yang Q, Hove A, Lin J (2014) Meeting China’s shale gas goals Selden TM, Forrest AS, Lockhart JE (1999) Analyzing the reductions in US air pollution emissions: 1970 to 1990. Land Econ:1–21 Sierra Club Atlantic (2012) Communities form an alliance against shale gas. Retrieved from http:// atlantic.sierraclub.ca/en/we-are-fracking-out/media/release/communities-form-alliance-againstshale-gas Speight JG (2013) Shale gas production processes. Gulf Professional Publishing Speight JG (2014) The chemistry and technology of petroleum. CRC Press The Economist (2011) Shale gas in Europe and America: fracking here, fracking there. The Economist, 26 November The National People’s Congress of the People’s Republic of China (2014) Environmental protectin law of the People’s Republic of China. Retrieved from http://www.npc.gov.cn/huiyi/lfzt/hjbhfx zaca/2014-04/25/content_1861320.htm The State Council (2014) China’s energy development strategy action plan (2014–2020). Retrieved from http://www.gov.cn/zhengce/content/2014-11/19/content_9222.htm The World Bank (2015) GDP (current US dollors). Retrieved from http://data.worldbank.org/ind icator/NY.GDP.MKTP.CD U.S. Energy Information Administration (2012) Annual energy outlook 2012 with projections to 2035 (DOE/EIA-0383(2012)) U.S. Energy Information Administration (2013a) Heat content of natural gas consumed. Retrieved from http://www.eia.gov/dnav/ng/ng_cons_heat_a_epg0_vgth_btucf_a.htm U.S. Energy Information Administration (2013b) Natural gas prices data 2008–2012. Retrieved from http://www.eia.gov/dnav/ng/ng_pri_sum_dcu_nus_a.htm U.S. Energy Information Administration (2013c) Primary energy consumption by source and sector, 2012. Retrieved from http://www.eia.gov/totalenergy/data/monthly/pdf/flow/primary_energy.pdf U.S. Energy Information Administration (2013d) Technically recoverable shale oil and shale gas resources: an assessment of 137 shale formations in 41 countries outside the United States. Retrieved from Washington, DC. http://www.eia.gov/analysis/studies/worldshalegas/ U.S. Energy Information Administration (2014) Annual Energy Outlook 2014 with Projections to 2040 U.S. Energy Information Administration (2015a) International energy data and analysis: China. http://www.eia.gov/beta/international/analysis_includes/countries_long/China/china.pdf U.S. Energy Information Administration (2015b) International energy statistics. Retrieved from http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=90&pid=44&aid=8

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U.S. Energy Information Administration (2020) International energy data and analysis: China. Retrieved from http://www.eia.gov/beta/international/analysis_includes/countries_long/China/ china.pdf U.S. Environmental Protection Agency (2000) Natural gas: air emissions. Retrieved from http:// www.epa.gov/cleanenergy/energy-and-you/affect/natural-gas.html U.S. Environmental Protection Agency (2013) Natural gas. Retrieved from http://www.epa.gov/cle anenergy/energy-and-you/affect/natural-gas.html U.S. Environmental Protection Agency (2014a) Clean energy: air emissions. Retrieved from http:// www.epa.gov/cleanenergy/energy-and-you/affect/air-emissions.html#footnotes U.S. Environmental Protection Agency (2014b) Profile of the 2011 naitonal air emissions inventory. Retrieved from http://www.epa.gov/ttn/chief/net/lite_finalversion_ver10.pdf UTNE Reader (2012) A successful fracking protest in Pennsylvania. Retrieved from http://www. utne.com/environment/fracking-protest-zm0z12sozlin.aspx Wang A (2013) The search for sustainable legitimacy: environmental law and bureaucracy in China World Bank (2013) World Bank global economic commodities database. https://www.worldbank. org/en/research/commodity-markets World Wide Fund for Nature (2012) Fracking and shale gas—no answer to climate change. http:// www.wwf.org.uk/wwf_articles.cfm?unewsid=5900 YCELP and CIESIN (2015) The 2014 environmental performance index. Retrieved from http://epi. yale.edu/epi/country-rankings Zhang B, Cao C (2015) Policy: four gaps in China’s new environmental law. Nature 517(7535):433– 434 Zhang C, Anadon LD (2013) Life cycle water use of energy production and its environmental impacts in China. Environ Sci Technol 47(24):14459–14467 Zhengfu B, Inyang HI, Daniels JL, Frank O, Struthers S (2010) Environmental issues from coal mining and their solutions. Min Sci Technol (China) 20(2):215–223

Chapter 2

A Review of Environmental Risks in Shale Gas Development

Abstract The rapid expansion of scale and area of shale gas production has raised a concern on potential environmental risks of shale gas development. Based on this concern, this chapter provides a description of shale gas resources and how it escalated into an energy revolution in the U.S. firstly. Thereafter, the extant literature on environmental risks in the shale gas industry worldwide is reviewed to understand the risks that shale gas development posed to water resources, air quality and climate change. The review shows that issues related to water resources and methane emissions are two most important environmental risks although the specific estimated results may vary each other. Finally, potential countermeasures for dealing with these risks are also provided by examining the theoretical and empirical literature on environmental enforcement and compliance. Keywords Shale gas production · Environmental risks · Water resources · Methane leakage · Environmental enforcement

2.1 Introduction In the past decade, shale gas production has increased rapidly. As the first country to realize the large-scale and commercial development of shale gas, the United States has increased its shale gas production from 36.6 billion cubic meters (bcm) in 2007 to 710.7 bcm in 2019, and the proportion of shale gas in total domestic gas production grew from 5.2% in 2007 to 74% in 2019 (EIA 2020). According to the estimates of the US Energy Information Administration, the expected production of shale gas in the US will continue to increase in future (EIA 2020). The success of the shale gas revolution in the US has greatly promoted its development in other countries. Canada has been producing shale gas since 2008, reaching 42.5 billion m3 in 2015 (Rivard et al. 2014; EIA 2016). China has also achieved commercial shale gas development (Guo et al. 2016b). In addition, Argentina, Algeria, Mexico and Australia have also begun shale gas exploration projects (Gholami et al. 2016). The development of shale gas is projected to expand rapidly in the future. However, the extraction activities may affect the environment. Many studies have pointed out that the large-scale development of shale gas may have a variety of adverse effects © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Guo and J. Wang, Environmental Impacts of Shale Gas Development in China, SpringerBriefs in Geography, https://doi.org/10.1007/978-981-16-0490-4_2

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2 A Review of Environmental Risks in Shale Gas Development

on the environment, such as greenhouse effect caused by methane leakage (Howarth et al. 2011), seismicity caused by fracturing activities (Mcgarr et al. 2015), impacts on biodiversity and habitats (Barton et al. 2016), increased water consumption (Nicot and Scanlon 2012), and water contamination (Vidic et al. 2013). This chapter reviews the extant literature on environmental risks in the shale gas industry worldwide. It begins by elaborating the development of shale gas resources, mainly by describing shale gas and examining how it escalated into an energy revolution in the U.S. An introduction of the critical milestones of shale gas development in China is then presented. Next, the potential environmental effects of shale gas development are discussed based on a review of the related studies. A brief review of the theoretical and empirical literature on environmental enforcement and compliance is then presented. Finally, the research gaps in the relevant fields are identified and the major topics of this book are proposed.

2.2 Shale Gas Development in the U.S. and China Shale gas is formed when natural gas is trapped within shale formations (Fig. 2.1). Shale formations are fine-grained sedimentary rocks formed by the accumulation of sediments at the bottom of seas or lakes. The particles in shale are mainly a mix of silt-size clay and quartz. Shale is characterized by its lamination and fissility, which means it is composed of many thin layers and can readily split into pieces along the layers. Black organic shale formations often imply rich resources of oil and gas.

Fig. 2.1 Schematic geology of shale gas resources (Source https://www.eia.gov/energyexplained/ natural-gas/where-our-natural-gas-comes-from.php)

2.2 Shale Gas Development in the U.S. and China

21

Many of the shale gas basins that have been discovered are black shale formations that yield gas, such as the Marcellus Shale in the U.S. and Sichuan shale basin in China. Shale gas developers usually use seismic data to explore shale gas resources because shale formations that interface with other rocks often form good seismic reflectors. Whether a shale formation contains shale gas resources can be inferred based on information on the geological history of that shale formation. However, whether the shale gas formation can be technically and economically developed needs additional analysis based on experimental data obtained after drilling a number of test wells. Even in the same shale deposit, two areas can have different expected levels of shale gas and hence require different development strategies. Generally, sweet spots and core areas, the areas which are predicted to be the most productive due to the higher porosity and permeability values, may provide much better economic returns than other parts of the formation. Natural gas was first extracted from shale formations in the U.S. in 1821, before the American revolution (Trembath et al. 2012). Hydraulic fracturing technology was first used to extract natural gas in 1947, became commercially available after 1949 and started to be applied in shale deposits in the 1970s (Montgomery and Smith 2010). After the Morgantown Energy Research Center and the U.S. Bureau of Mines initiated the Eastern Gas Shales Project in 1976, engineers from federal organizations and natural gas companies began to work closely together. In 1977, the U.S. Department of Energy successfully demonstrated massive hydraulic fracturing in shale (Trembath et al. 2012). Although the first horizontal well was drilled as early as 1929, horizontal drilling was not widely used until the late 1970s (King 2012). Aided by the government tax credit policy on shale gas production, the first multi-fracture horizontal well was drilled successfully in 1986 (Yost 1988). With the support of federal R&D funding, Mitchell Energy successfully drilled its first horizontal well in the Barnett Shale in Texas in 1991 (Yost 1988), and achieved commercial extraction seven years later in 1998. In the 2000s, U.S. domestic shale gas production grew rapidly. In China, the Ministry of Land and Resources (MLR) started to investigate the shale gas resources in collaboration with the China University of Geosciences (CUG) in 2004 and officially launched the first exploration project in Chongqing City in 2009 (Zero Power Intelligence 2014). The first multi-fracture horizontal well was successfully fracked by PetroChina in Sichuan Basin in 2011. The MLR then held two rounds of auctions for exploration rights of shale gas in 2011 and 2012, respectively. The National Energy Administration issued a Shale Gas Industry Policy in 2012, which provided clear directions for the development of the shale gas industry in China. Influenced by the success of the recent shale gas boom in the U.S., the Chinese government also established a series of policies to support and promote the development of shale gas in 2012. These policies include production subsidies (0.4 RMB/m3 from 2012 to 2015, 0.3 RMB/m3 from 2016 to 2018 and 0.2 RMB/m3 from 2019 to 2020), waivers on price controls and fees, and the reclassification of shale gas as an independent mineral resource, which has allowed for development policies that are distinct from those for conventional gas (Sandolow et al. 2014).

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In 2013, Sinopec’s Fuling shale gas field was approved as the first State Shale Gas Demonstration Area in China and the company announced that it was embarking on large-scale commercial development in the following year. The Chinese government has set an annual production goal of at least 30 bcm for 2020 in China’s Energy Development Strategy Action Plan (2014–2020) (The State Council 2014). However, prior to this, the official target for annual production in China’s Shale Gas Development Plan (2011–2015) was 60–100 bcm by 2020 (National Development and Reform Commission 2012), which is more than double that of the latest target. In the last few years, significant progress has been made in developing China’s shale gas reserves, mainly by PetroChina and Sinopec in the Sichuan shale gas basin. However, the shale gas production in Sinopec’s Fuling shale gas field is difficult to replicate because of geological factors and the need for significant investment. Hence, the government’s production goal was reduced according to the future production estimation based on the actual progress of development. The production of shale gas resources was 15.38 bcm in 2019 which mainly come from the production fields in Sichuan Basin (Ministry of Natural Resources of China 2019). The shale gas revolution that started in the U.S. has spread to other countries. Numerous studies have suggested that the share of shale gas in the energy production and consumption mix will continue to increase (MIT 2011; Brown et al. 2010). Shale gas is also likely to play an increasingly important role in future development, especially in China. However, to develop shale gas, countries face challenges that go beyond the technology, such as the environmental problems induced by fracking. Hence, it is critical for the future development of shale gas to address the negative effects on the environment.

2.3 Impacts of Shale Gas Development on Water Resources 2.3.1 Overview of Water Risks at Each Stage of Water Cycle in Shale Gas Development Due to the characteristics of shale formations, economic exploitation of shale gas cannot be achieved by traditional extraction techniques. In this context, unconventional extraction techniques, mainly horizontal drilling and hydraulic fracturing, are necessary. Horizontal drilling requires the wellbore to continue extending nearly horizontally after entering the reservoir to ensure that the well is substantially or completely within the reservoir (Wang et al. 2017). Hydraulic fracturing involves injecting high-pressure fracturing fluid into the target reservoir and fracturing the reservoir after horizontal drilling; proppants within the fracturing fluid keep the network of newly-created fractures open, thereby increasing the porosity and permeability of the reservoir layer. This section analyzes the potential impacts on water resources of shale gas development using these two techniques, by examining each stage of water cycle in the production.

2.3 Impacts of Shale Gas Development on Water Resources

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Table 2.1 Water risks at each stage of fracking water cycle Stages

Water acquisition

Chemical mixing

Well injection

Flowback and Wastewater produced (F/P) treatment and water disposal

Main activities

Acquiring and transporting freshwater from deposits or rivers

Mixing freshwater with proppants and additives; storing mixtures

Injecting the mixtures (known as fracturing)

Injected mixtures flowing back to the surface; storing and transporting

Treating and disposing the F/P water

Main risks

Stress of local water resources

Spills and accidents; storage equipment failure

Well integrity failure; connection to the shallow subsurface/aquifers

Spills and accidents; storage equipment failure

Spills and accidents; Inadequate treatment before release

The water cycle of fracking for shale gas includes five stages: water acquisition, chemical mixing, well injection, flowback and produced water, and wastewater treatment and waste disposal (Kaden and Rose 2015). Table 2.1 shows these stages in the water cycle, with the corresponding risks on water resources. The first stage is water acquisition. This stage involves determining the necessary volume of water acquisition and forming an acquisition plan according to the drilling and fracturing program. Then, water resources are mainly obtained from the surrounding lakes, reservoirs, and rivers. This process usually consumes large amounts of fresh water, due to the application of horizontal drilling and hydraulic fracturing techniques, and some wells may require refracturing during the whole life cycle, in which case water consumption will be larger. Therefore, in the water acquisition stage, the main impact of shale gas development on water resources is through water consumption. Further, the degree of impact on water resources is often related to the availability of regional water resources. If the water consumption of shale gas development accounts for a large proportion of regional water availability, there will be a significant negative impact on regional water resources. The second stage is chemical mixing. The collected water is mixed with proppants and chemical additives after being transported to the wellsite. These mixed fluids are then stored in storage facilities in the wellsite and used as fracturing fluid in fracturing activities. The main concern in this stage is that these mixtures contain many chemical additives, some of which are toxic or carcinogenic. From 2005 to 2009, about 750 chemicals and other components were used for hydraulic fracturing in the US (Waxman et al. 2011). In addition, the detailed chemical components of fracturing fluids are rarely publicly reported by operators, which undoubtedly increases public concerns (Rahm and Riha 2014). Therefore, in the chemical mixing stage, the main risk is water contamination due to leakage of fracturing fluids into surface water during the processes of mixing and storage.

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2 A Review of Environmental Risks in Shale Gas Development

The third stage involves injecting the mixture into the well. Before injection, some construction quality defects in well drilling, well cementation, and well completion (such as casing faults, wellbore integrity failures, and improper well plugging) may cause the leakage of hydrocarbon gases into the groundwater around gas wells. After fracturing fluid injection, some newly-created fractures that extending into the upper formation, can likewise become paths for the migration of hydrocarbon gases. In some areas, there are higher concentrations of methane in water wells close to fracking sites (Osborn et al. 2011; Jackson et al. 2013). Actually, methane is a potential threat to human health in high concentrations (explosion hazard), the reaction caused by methane-based hydrocarbons through leakage or migration into the aquifer can also lead to pollution. For example, the migration of methane into the aquifer can lead to a change in oxidation-reduction conditions and remobilized some heavy metals (e.g. arsenic) (Vidic et al. 2013). In addition, anaerobic bacteria that proliferate under such conditions may convert sulfates to sulfides, causing water and air pollution problems. The fourth stage is the flowback and produced water. In general, a portion of injected fracturing fluid will return to the surface in the first two to four weeks after hydraulic fracturing and before gas production commences; these fluids are called “flowback water” (Li et al. 2016). Another portion of the fluid combined with some formation water will be produced and returned to the surface during the production of shale gas over the lifecycle of the well; these fluids are called “produced water” (Wang et al. 2018). Flowback and produced water (named F/P water in this chapter) contains both the injected fracturing fluid and formation water. This formation water carries a large amount of complex compounds such as salt, heavy metals, and radioactive materials. Therefore, F/P water usually has a high salinity. The average total dissolved solids (TDS) concentration in F/P water is 800 to 300,000 mg/L, while the common concentration of TDS in seawater is 35,000 mg/L (Kuwayama et al. 2015). In addition, F/P water also contains toxic elements such as thorium and radioactive radium. For example, a sample from northeastern Poland showed that after hydraulic fracturing, the observed Ra-226 and Ra-228 activity in the flowback water increased significantly (Jodłowski et al. 2017). Samples from regions such as Marcellus also contained elements such as arsenic and selenium (Balaba and Smart 2012). F/P water needs to be stored and transported. During these storage or transportation processes, water contamination may occur through F/P water leakage into surface water due to accidents or equipment failure. The last stage is F/P water treatment and disposal. There are several options for F/P water management. For example, deep-well injection is one of the common options, which involves injecting the untreated F/P water into deep abandoned wells. However, this injection may raise public concerns about the risks of water pollution and induced seismicity. For example, Kassotis et al. (2016) report high levels of endocrine disrupting chemicals (EDCs) in surface water extracts associated with a wastewater injection disposal facility, and some other studies show that the sharp rise in Oklahoma seismicity since 2008 may be due to wastewater injection (Keranen et al. 2014; Hincks et al. 2018). Another option is to discharge F/P water after it is first treated. There are two different treatment methods. One is to use municipal

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sewage treatment plants; however, most of these plants are not designed to remove the high levels of TDS or naturally occurring radioactive materials (NORM) found in F/P water (Maloney and Yoxtheimer 2012). Especially in some rural areas, the municipal wastewater treatment plants would be rather small, they even don’t have enough capacity to handle the additional volume of wastewater. The other is to use industrial centralized wastewater treatment (CWT) plants, which are designed to treat F/P water. However, accidental discharges or spills during transportation and treatment may still pose water pollution risks (Gao and You 2017a). Improper treatment or disposal of F/P water has been seen as the main cause of water pollution in the current literature (Rahm and Riha 2012). As the preceding analysis indicates, the impact of shale gas development on water resources involves two main aspects, water consumption and water contamination. The water acquisition stage is related to water consumption, while the four later stages are related to water contamination. The following sections focus in turn on water consumption and water contamination.

2.3.2 Water Consumption Water consumption in shale gas development is usually estimated by two indicators: water consumption per well and water intensity. This section describes the current water consumption situation of shale gas development, with an emphasis on studies of the two indicators. It then combines the estimated results in the studies with actual developments of shale gas to assess the impacts of high water consumption on the water resources.

2.3.2.1

Water Consumption Per Well

Current studies mainly use water consumption per well to describe water consumption of shale gas development, and their general conclusion is that the single well water consumption of shale gas is significantly higher than for conventional natural gas. For example, Kohshour et al. (2016) track water consumption per well in the US and show that each shale gas well requires between 11,400 and 22,700 m3 of water, and up to 30,100 m3 in the case of multiple fracturing over the entire lifecycle of the well. In contrast, a conventional natural gas well usually needs only 4,500 m3 of water, which is much lower than the requirements of a shale gas well (Nicot 2009). This huge difference has two main reasons. The first is that shale gas wells that use horizontal drilling usually require a greater wellbore length, which involves more drilling fluid and completion cement than conventional gas wells. The second and most important reason is the use of fracturing fluid. The amount of drilling fluids used at Marcellus, Barnett, and Fuling is 379 m3 , 1514 m3 and 300 m3 respectively, while fracturing fluid use is much greater, respectively 17,214 m3 , 11,755 m3 , and 30,366 m3 (Guo et al. 2016b).

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2 A Review of Environmental Risks in Shale Gas Development

A review of current studies also reveals a wide range of water consumption figures for shale gas production; understanding the reasons for this difference is important. Summarizing existing research reveals that the differences have three main causes. The first and most important is spatial factors, i.e., differences in geological conditions in different shale regions. According to the researchers’ studies, the average water consumption for a single well in US Eagle Ford shale paly is about 16,100 m3 (Nicot and Scanlon 2012), while this value is around 25,000 m3 in China’s Sichuan shale play (Wang et al. 2018; Chang et al. 2014; Shi et al. 2020) and 10,400 m3 in Canada’s Montney shale paly (Goss et al. 2015; Alessi et al. 2017). It can be seen that water use per shale gas well in different shale plays is distinct. The burial of shale formations and formation conditions may vary greatly, which will affect the well depths and the required water quantities (Wang et al. 2018). The second reason is time. Even in the same shale play, studies carried out at different times may show different results. Taking Bakken shale play as an example, we can see that water use in 2011 was 7,270 m3 /well, while the number increased to 8,970 m3 /well in 2012 (Horner et al. 2016). This increase was not just confined to Bakken; over the whole US, average water consumption per well has increased annually in recent years (Kohshou et al. 2017) (Fig. 2.2). The main reason for this phenomenon is that, due to the development of drilling technology over time, the length of horizontal section, number of fracturing stages, and length of cracks will increase over time, resulting in increased water consumption. Still taking Bakken region as an example, the horizontal length of wells increased by 25% between 2009 and 2013, and water consumption also increased by a factor of four (Horner et al. 2016). Another reason may be that high-quality shale deposits (e.g., “sweet spots”) is usually exploited first and consume relatively low amounts of water resources, while the subsequent development of resources may require more water consumption. The third reason is differences in models and research boundaries. A processbased life cycle assessment (P-LCA) model is the most commonly used model in the literature for assessing direct water use in shale gas extraction. A hybrid

Average water use per well [m3 /well]

30000 25000 20000 15000 10000 5000 0 2011

2012

2013

2014

2015

2016

Fig. 2.2 Average water use per well in the U.S. by year (Source Kohshou et al. [2017])

2.3 Impacts of Shale Gas Development on Water Resources

27

LCA model combining a process-based LCA model and an economic input-output LCA model is used in some studies, however, to consider both direct and indirect water use. For example, Dale et al. (2013) use a P-LCA model to calculate water consumption and quantify its impacts. Gao and You (2017b) analyze the life cycle environmental impacts of shale gas and consider water acquisition using a hybrid LCA model. In addition to models, research boundaries can also affect assessment results. Most research boundaries include only upstream activities, while others also include midstream transportation and downstream utilization (e.g., Laurenzi and Jersey 2013). Even for upstream activities, some studies include the exploration phase (e.g., Considine et al. 2009), while others do not (e.g., Wang et al. 2017, 2018). From the preceding analysis, it can be seen that due to the application of horizontal drilling and hydraulic fracturing technology, the water consumption per well of shale gas is indeed higher than conventional natural gas. However, there are still some deficiencies in the literature on shale gas water consumption. First, current studies mainly focus on the US, only a very few have been carried out for other countries. As geological conditions have a great impact on assessment results, conclusions from US-focused studies cannot be directly applied to other countries. For example, Wang et al. (2018) present a comprehensive assessment of water consumption per well in China’s Sichuan shale play and show that China’s shale gas well may consume more water than wells in the US and Canada. Therefore, to improve global understanding of water use in shale gas development, it is necessary to expand the geographical areas of study. Second, most current studies ignore the time factor in their assessment, even though it is critical for understanding the environmental impacts of technique improvement.

2.3.2.2

Water Intensity

Two different definitions of water intensity are usually applied in the current literature. The first defines water intensity as fracturing water consumption divided by horizontal length of shale gas wells. For example, this definition is used by Nicot and Scanlon (2012) to describe the water intensity of Barnett, Haynesville, and Eagle Ford Shale. The rationale for this definition is that water consumption caused by hydraulic fracturing activities accounts for a large proportion of the entire water use, and the length of the horizontal section is a key factor affecting fracturing water consumption (Guo et al. 2016b). However, it should be noted that thousands of cubic meters of water may still be consumed in drilling and other activities. Therefore, to comprehensively reflect water use, many scholars have proposed another definition of water intensity: total water consumption per well divided by total gas output per well (Wang et al. 2018; Kuwayama et al. 2013; CEC 2012). For the rest of this paper, water intensity will generally refer to this definition. Kuwayama et al. (2013) estimate that the water intensity of shale gas ranges from less than 1.3 m3 water/104 m3 gas to 36.6 m3 water/104 m3 gas, with an average value of 9.1 m3 water/104 m3 gas. According to the statistics of the US Chesapeake

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2 A Review of Environmental Risks in Shale Gas Development

Company, however, the water intensity of shale gas is much lower, only 1.1 m3 water/104 m3 gas to 4.3 m3 water/104 m3 gas (CEC 2012). The reasons for this difference are not only different estimates of water use per well, but also different estimates of total gas output. Estimated ultimate recovery (EUR) is always used to represent the total gas output of shale gas wells, which is evaluated based on three important parameters: initial production (IP), production decline rate, and well lifespan (Stephen et al. 2014; Yu et al. 2016). The application of these three parameters across different studies is not consistent, however. Taking well lifespan as an example, the lifespan is assumed to be 30 years by Xia et al. (2015), while Guo et al. (2016b) assume it to be 20 years. In addition, although the water intensity results of different studies are quite discrepant, these studies all show that the water intensity of shale gas is higher than that of conventional gas, but lower than that of various oil exploitation activities.

2.3.2.3

The Impacts of Large Water Consumption

Studies of water consumption per well and water intensity mainly focus on shale gas well level, which cannot reflect the impacts of shale gas extraction on regional water resources. Therefore, some studies try to consider the impacts of shale gas development from a regional perspective. At present, the main approach used in research into the impacts of large water consumption in shale gas development is comparing the total water consumption for extracting shale gas with total regional water resources (Nicot and Scanlon 2012; Wang et al. 2018; Monize et al. 2011). The total water consumption for shale gas extraction can be assessed either from water use per well and annual number of drilling wells, or from water intensity and annual gas production. The total regional water resources can be obtained from reports issued by government water resources management departments (Wang et al. 2018). The main conclusion drawn in such studies is that shale gas development has minor impacts on regional water resources, because the total water use for shale gas extraction only accounts for a relatively small proportion of total available water resources. For example, Nicot and Scanlon (2012) found that water consumption for shale gas wells (≥20,000) accounts for a relatively small proportion of the total water consumption in Texas (