REPORT OF THE NOVA SCOTIA INDEPENDENT PANEL ON HYDRAULIC FRACTURING Frank Atherton Michael Bradfield Kevin Christmas Shawn Dalton Maurice Dusseault Graham Gagnon Brad Hayes Constance MacIntosh Ian Mauro Ray Ritcey David Wheeler (Chair)* Submitted to: The Province of Nova Scotia Department of Energy For the Attention of: The Honourable Andrew Younger, Minister of Energy 28th August 2014 *All correspondence on this report should be addressed to the Chair of the Panel Dr David Wheeler, President of Cape Breton University, PO Box 5300, 1250 Grand Lake Road, Sydney, Nova Scotia, B1P 6L2 “The health of the people is the highest law.” Cicero (106 - 43 BC) PROJECT STAFF Margo MacGregor - Project Manager Debra Ginnish - Aboriginal Outreach Officer Nicole McNeil - Research Officer TECHNICAL ADVISORY GROUP Fred Baechler - Primary Technical Advisor Michael Gardner - Special Advisor Keith MacLeod - Senior Advisor John Snow Jr. - Consultant on First Nations Natural Resource Management RESEARCH ASSISTANTS Alexandra Ord • Georgia Llyod-Smith • Jamie Fraser • Jillanna Brown Jonathan Smith • Jordan Poitras • Lindsay Anderson • Sarah Saunders ACKNOWLEDGEMENTS We are grateful to Mark Austin, formerly of the Secretariat to the Nova Scotia Commission on Building Our New Economy and Doug Wright, Rebecca Chapman and François Bregha of the Council of Canadian Academies for their thoughtful contributions and comments on this Report. However, responsibility for the final Report remains with the Panel. Thank you to a number of experts working for the Province of Nova Scotia in the Departments of Energy, Natural Resources and Environment who were asked to provide information on various aspects of our review, your assistance and support was appreciated. We would also like to thank Tarra Chartrand with the Centre for Water Resource Studies at Dalhousie University for her assistance coordinating panel meetings and Dalhousie University for hosting meetings in Halifax. We would also like to acknowledge the following Cape Breton University staff for their special assistance during this project: Debi Walker, Lenore Parsley, Nicole Dixon, Ramona Lewis, Jacqueline Cote, Matt Stewart, Gail Jones, Crystal Aboud and Kyla Horne. Finally we would like to thank all those stakeholders – individuals and organisations – who devoted significant time and energy to engaging with this Review through the submission of evidence, providing commentary on our discussion papers and attendance at public meetings. Table of Contents Executive Summary 1 Introduction to the Report 6 I.1 Mandate from the Province and Scope of the Review 7 I.2 Methodology 8 I.2.1 Philosophy of Approach 8 I.2.2 Approach to Participation by Stakeholders 12 I.2.3 Results of Participation by Stakeholders 15 I.2.4 Appointment of Panel, Employees, and Consultants 18 I.2.5 Writing of Discussion Papers and Final Chapters 18 I.2.6 Unfolding of the Process from the Publication of this Report 19 I.3 The People and Places of Nova Scotia 20 I.4 The Economy of Nova Scotia 26 I.4.1 The Economic Context 26 I.4.1.1 Nova Scotia Commission on Building Our New Economy 26 I.4.1.2 The ONE NS Report and the Context for Natural Resource Management 29 I.4.1.3 The ONE NS Report and Public Attitudes to Natural Resource Management 30 I.4.1.4 The ONE NS Goals and Relevance for Unconventional Gas and Oil Development 32 I.4.1.5 Summary of Economic Context 34 I.4.2 Externalities 35 I.4.2.1 Market Imperfections and Externalities 35 I.4.2.2 Dealing with Externalities 38 I.4.2.3 Outstanding Questions on Externalities 39 I.4.2.4 Benefits of Unconventional Gas 40 I.5 Energy Policy in Nova Scotia 41 I.5.1 Energy Policy Context 41 I.5.2 The Role of Fossil Fuels in Nova Scotia 42 I.5.3 The Potential Role of Unconventional Gas in Nova Scotia 43 I.6 Environmental, Health, and Social Risks 45 I.7 Reflections on Public Feedback and Future Discussions 47 I.8 Report Structure 48 References 52 Chapter 1: The Process of Hydraulic Fracturing: An Overview 55 1.0 Chapter Summary 56 1.1 Introduction 56 1.2 What is Hydraulic Fracturing? 56 1.2.1 What Industries use this Technology? 57 1.2.2 Which Industrial Use are we Dealing with in this Review? 57 1.3 What are “Shale Gas” and “Shale Oil”? 57 1.4 Is the Exploitation of Unconventional Reservoirs Something New? 58 1.5 Why is the Exploitation of Unconventional Reservoirs Increasing? 59 1.6 How are Wells Drilled to Access Unconventional Gas Reservoirs? 60 1.6.1 How is the Site Prepared for the Well Drilling Stage? 60 1.6.2 How is Drilling Accomplished? 61 1.7 How is Hydraulic Fracturing Accomplished? 64 1.7.1 What is the Fracturing Fluid Composed Of? 65 1.7.2 What is Brought Back to the Surface after Fracturing? 66 1.7.3 What is Done with the Flowback Water? 67 References 68 Chapter 2: The Potential Oil and Gas Resource Base in Nova Scotia 71 2.0 Chapter Summary 72 2.1 Introduction 73 2.2 Nova Scotia Infrastructure and Markets 73 2.2.1 Terrain 73 2.2.2 Roads, Bridges, and Railways 74 2.2.3 Pipeline Infrastructure 74 2.2.4 Oil Infrastructure 76 2.2.5 Markets 76 2.3 Oil and Gas Resource Assessment – Background 77 2.3.1 Recovery Factors 78 2.3.2 Summary 80 2.4 Prospective Petroleum Basins in Nova Scotia 81 2.4.1 Regional Petroleum Geology 81 2.4.2 Unconventional Gas and Oil Potential in NS Basins 85 2.5 Industry Activity 86 2.6 Application of Hydraulic Fracturing Technology 87 2.7 Summary and Conclusions 89 References 92 Chapter 3: Development Scenarios and Potential Economic Impact 96 3.0 Chapter Summary 97 3.1 Unconventional Gas and Oil Development Scenarios 97 3.1.1 The Art of Scenario Planning 97 3.1.2 Plausible Scenarios for Unconventional Gas Development in Nova Scotia 99 3.2 Petroleum Operations Costs and Opportunities in Nova Scotia 101 3.2.1 Exploration 101 3.2.1.1 Obtaining Exploration Rights 101 3.2.1.2 Identifying the Hydrocarbon Resource 102 3.2.1.3 Drilling the Exploration Well 103 3.2.1.4 Hydraulic Fracturing 106 3.2.2 Development and Production 107 3.2.3 Petroleum Development Costs and Benefits – Industry Perspective 109 3.2.4 Petroleum Development Impacts – A Community Perspective 112 3.2.4.1 Risk Factors and Potential Costs 112 3.2.4.2 Benefits 113 3.3 Royalties 115 3.3.1 The Nova Scotia Royalty Regime 115 3.3.2 Estimating Royalty Revenues 116 References 120 Chapter 4: The Protection of Public Health 122 4.0 Chapter Summary 123 4.1 Introduction: Context and State of Knowledge 124 4.2 Public Health Principles 124 4.3 Determinants of Public Health 125 4.4 Hydraulic Fracturing: A Lifecycle Approach to Health Risks 127 4.5 Exposures and Risks 128 4.5.1 Exposure Pathways 128 4.5.2 Chemical Contamination of Water Sources 129 4.5.3 Atmospheric Pollution 130 4.5.4 Noise and Other Nuisance Impacts 131 4.5.5 Traffic 132 4.5.6 Impact on Climate Change 133 4.5.7 Community Impacts 133 4.5.8 Occupational Health 134 4.5.9 Accidents and Incidents 134 4.6 Mitigation Measures 135 4.6.1 Health Impact Assessment 135 4.6.2 Health Status Monitoring 136 4.6.3 Emergency Preparedness 136 4.6.4 Research 136 References 137 Chapter 5: Socioeconomic and Social Ecological Impacts on Communities 140 5.0 Chapter Summary 141 5.1 Introduction 141 5.2 Socioeconomic Effects of Unconventional Gas and Oil Development at Various Scales 144 5.3 The Local Economy 147 5.3.1 Social and Physical Infrastructure 148 5.3.2 The Natural Environment 149 5.3.3 Social Relations within Communities 151 5.3.4 Opposition 152 5.4 Implications for the Nova Scotia Community Context 156 5.5 Summary and Outstanding Questions 160 5.6 Conclusion 161 References 163 Chapter 6: Impacts on Water 166 6.0 Chapter Summary 167 6.1 Current Status of Water in Nova Scotia 167 6.1.1 Regulatory Framework and Water Use 167 6.1.2 Drinking Water Quality 172 6.2 What are the Concerns with Water and Unconventional Gas and Oil? 176 6.2.1 Water Quantity 176 6.2.2 Water Quality 178 6.3 How Are Water Issues Addressed in Other Jurisdictions? 180 6.4 How Are Water Issues Addressed Currently in Nova Scotia? 182 6.4.1 Surface and Groundwater Approvals in Nova Scotia 182 6.4.2 Wastewater Management of Hydraulic Fracturing in Nova Scotia 183 6.5 Can Water Issues Related to Unconventional Gas and Oil Development be Adequately Managed in a Nova Scotia Context? 186 6.6 Summary 187 References 189 Chapter 7: Well Integrity 193 7.0 Chapter Summary 194 7.1 Introduction 195 7.2 Well Design 198 7.3 Well Construction 200 7.3.1 Drilling and Casing the Well 200 7.3.2 Cementing Practices 202 7.4 Well Completion 204 7.5 Well Integrity during Production 205 7.5.1 Gas Migration during Production 205 7.5.2 Leakage Behind the Casing 206 7.6 Well Decommissioning and Long-Term Integrity 211 7.6.1 The Decommissioning Procedure 211 7.6.2 Long-term Wellbore Integrity 212 7.7 Discussion and Conclusions 213 References 218 Chapter 8: Public Participation in the Assessment of Risk 221 8.0 Chapter Summary 222 8.1 An Introduction to Complex or “Wicked” Problems 223 8.2 Nova Scotia’s Natural Resources, Energy, and Environmental Goals 223 8.2.1 Ecozone and Natural Resources 223 8.2.2 Regional Energy Mix 224 8.2.3 Environmental Goals and Planning 225 8.3 Environmental Perspectives of Nova Scotians 226 8.3.1 Public Input and Approach 226 8.3.2 Findings from Public Submissions 227 8.4 Environmental Impacts of Hydraulic Fracturing 230 8.4.1 Impacts on Water 230 8.4.2 Community and Infrastructure 231 8.4.3 Economy 232 8.4.4 Waste and Clean up 235 8.4.5 Human Health 237 8.4.6 Climate Change 239 8.4.7 Environment 240 8.5 Risk, Responsibility, and Renewal 244 References 250 Chapter 9: Regulatory Issues 257 9.0 Chapter