THE FUTURE OF FRACKING - Hydrofracking: What Everyone Needs to Know - page 79

ane can be recovered each year—gas that was previously wasted. 30 The EPA calcu-
lates green completions will yield $11 million to $19 million in savings per year. 31
The agency has allowed the industry to delay full implementation of the rules
until 2015, to ensure a smooth transition. Critics maintain the rules still have wor-
risome loopholes: existing facilities, for instance, are allowed to release one ton of
benzene per year from specified equipment. Nor are industry experts happy with
them. In fact, both sides of the fracking debate have threatened to sue the EPA over
the new rules.

How Has the Business of Hydrofracking Evolved?

While the gas rush has benefited many Americans, it has not always made drillers
and their investors rich. By 2013, exploration companies had poked so many bore-
holes into the ground and sucked so much natural gas out of shale that they pro-
duced a glut, dropped prices to near record lows, and left the hydrofracking in-
dustry with a hangover. “We just killed more meat than we could drag back to the
cave and eat,” Texas investment banker Maynard Holt, of Tudor Pickering Holt,
who advised on many gas deals, lamented to the New York Times . “Now we have
a problem.” 32
As noted in chapter 1 , shale gas cost $13.68 per million BTU (MBTU) at Henry
Hub, the main pricing point for American natural gas, in 2008. But by 2012, gas
prices had fallen over 60 percent, to less than $2 per MBTU. By May 2013, prices
had perked up, to $4.04 per MBTU, and the EIA expects the price to rise slightly,
to $4.10 per MBTU, in 2014. 33
Despite this slow recovery, hydrofracking is still not economical for many
drillers. Most need the price to rise over $4 to cover costs, and the “sweet
spot”—the price at which producers can make money while consumers are not too
pinched—is about $5 or $6 per MBTU, analysts say. 34
Because of the plunge in prices, the credit ratings and stock price of companies
that had expanded rapidly into hydrofracking—such as Chesapeake Energy, Devon
Energy, and Southwestern Energy—took a pounding. Many drillers took rigs out
of production or shifted them to other regions.
In late 2012, the number of drill rigs exploring for natural gas fell by 30 percent,
to 658, according to the energy services company Baker Hughes. 35 The steepest