Gavin Wright is one of the best economic historians of the United States. In a seminal article, he advanced two findings. First, early American industrial success was due to access to cheap abundant natural resources. Second, there was nothing special about America’s geological endowment that caused it to enjoy cheaper and more abundant natural resources. Rather, Americans were particularly innovative in figuring out ways to turn their geological endowments into usable economic resources. In a 1995 paper with Paul David, the authors cheekily called American resource abundance “socially constructed.”
American industrial dominance faded as the technologies developed in the United States spread to other places. (Lower transportation costs helped: cheap Australian iron could power Japanese industrial exports, for example.) Over time, some countries also developed the ability to indigenously develop new natural resources (an article by Wright and Jesse Czelusta mentions various South American nations, in addition to Australia, Canada and Norway) but it really was not until the second half of the 20th century.
History is repeating itself. The technologies allowing for the development of shale gas and tight oil have originated in the United States. (There has got to be a paper in why.) But there is nothing particularly special about America’s geology. There is likely a lot of shale gas in Europe, among other places.
The question is how fast can the technologies invented in the United States be deployed overseas? The Economist points out that even if you can get past the political barriers, it will still likely take a decade for exploration and development. I am not so sure that it has to take that long, but there is a very serious obstacle to developing European shale ... the flowback.
Basically, when you dig a shale well it produces a lot of wastewater: the flowback (e.g., the fluid that you pumped down there to fracture the rock) and other water liberated during the drilling. That water is nasty stuff, regardless of what you pumped down there in the first place. It contains heavy metals, icky long-chain hydrocarbons, and is slightly radioactive. (The link goes to a USGS report.) In most U.S. plays, you get about 600,000 gallons of flowback and other water in the first ten days. You then get another 200 to 1,000 gallons per thousand cubic feet (MCF) of natural gas. (An EPA study is here.)
So what do you do with the toxic and salty and mildly radioactive flowback? Well, in the United States we pump it into Class II disposal wells: lightly regulated abandoned old wells, mostly owned and run by small mom-and-pop operations. (And I do mean lightly regulated. Click the link and be horrified.) We truck the stuff thousands of miles (in an exercise with some of my students, we estimated a minimum flowback disposal cost of 25¢ per MCF) or recycle it for use in other fracks. Chesapeake, for example, reuses about 6% of its water and aims to up that to 20% in some plays. But that will still leave 80% of the sludgy briny glowing water to be dumped somewhere.
And most of Europe does not have a century of oil and gas drilling behind it. The U.S. has literally hundreds of thousands of Class II wells lying around. Britain and Poland do not. So where are they going to dump the wastewater?
I would go so far as to call this a dealbreaker for most European countries (Ukraine excepted) save for one caveat: there is a huge opportunity for companies that can invent ways to better reuse the flowback. The DOE has already put some (rather small) monies towards this purpose. But this is a place where the case for subsidies is weak. There are huge incentives for anyone who can figure out a way to substantially cut the amount of flowback from fracking to make a lot of money.