A ban against hydraulic fracturing is unlikely due to “the scientific evidence available today and the economic impact of shutting down shale-gas drilling”—but increased regulation could hike drilling and completion costs by as much as $500,000. This according to a report from Tudor, Pickering, Holt & Co. and Reservoir Research Partners. The analysts who authored the study say the cost increase—while not a “game-changer”—could arrive via either state or federal regulations drawn up in reaction to the ongoing fracing debate.

As industry feared, the Macondo oil spill in the Gulf of Mexico and recent accidents in shale plays have heated up the fracing debate.

“If you think no-one will connect deepwater oil to onshore shale, think again,” according to the authors. “Both the oil spill and recent natural gas drilling accidents spotlight the inherently difficult nature of the oil and gas business and have tarnished industry credibility.”

Operators may face additional costs per well even without federal regulation (which the analysts think is doubtful), of $200,000 to $500,000. Extra well casing, more rigorous cementing and water treatment all will play into the cost increases, with some plays requiring more attention than others.

The Environmental Protection Agency recently held its first public hearing on fracing in preparation for a study it is undertaking on the practice. If Congress mandates EPA oversight, look for costs to increase by an additional $125,000 to $250,000 per well.

Companies who are already adopting best practices regarding water disposal, such as recycling initiatives in the Marcellus shale, are ahead of the game.

“The industry will have no choice but to spend more money to protect itself from liability and reputational risk as the shale-drilling boom marches on,” notes the report.

“Some companies are in fact already choosing to spend more; one major producer told us: ‘We don’t see the costs as that overwhelming.’

“In Pennsylvania, where the economy is already transformed by the drilling boom, producers told us it is simply worth it financially to go up against a wall of opposition to drill a well,” the analysts say. “Even in some regions of New York, we believe companies with strong nerves and a willingness to control their environmental footprint will drill profitable leases—eventually.”

For coverage of the first EPA public hearing on fracing held recently in Denver, see the News­well article in this issue.

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