Shale Gas Issues: Squeezed between necessity and reality
10 February 2012
Mayer Brown White Paper
The relatively recent technological development of combining hydraulic fracturing and horizontal drilling to produce large quantities of natural gas (and liquids in many cases) from shale formations in the United States has and will likely continue to have significant impact on energy production. These developments will influence not only the price of hydrocarbons but also the economics of alternative energy development. At the same time, the prospect of conducting drilling activities, particularly in densely populated areas and those not familiar (at least recently) with oil and gas operations, has focused attention on potential risks associated with these activities. Not surprisingly, then, there has been a great deal of positive and negative excitement due to the current growth in hydrocarbon exploration and production in shale formations. This paper addresses three legal risk areas: (1) environmental regulatory and litigation risks, (2) nearby property owner damage and contamination litigation risks, and (3) securities law risks— with an acknowledgement to the concomitant political risks. While these risks cannot be eliminated, the purpose of the paper is to provide recommendations to those involved in the development and production of shale gas reserves that will mitigate these risks. We focus here on natural gas, but many of the issues will be similar for shale oil.