The Evolution of Shale, a Source of Natural Gas

Shale gas play didn't enter the picture until 1999. Since then, companies have found large formations in the Barnett Shale in Texas, Fayetteville in Arkansas, Haynesville in Louisiana and Marcellus in the Northeast.

Shale is a natural gas. This means primarily contains methane, a chemical compound found in sedimentary rock formations. Before consuming methane, the chemical needs to go through processing to shed other materials like butane and propane.

Types of Unconventional Gas Sources

There are three types of unconventional gas sources that make up almost half of US production:

• Shale gas, which comes from shale rock.
• Coalbed methane (CBM) from coal seams.
• Tight sands (TS) comes from low-permeability sandstone, siltstone and carbonate reservoirs.

These three sources for natural gas fall under unconventional gas because they're harder to access and extract. It's possible that 10 years from now, the industry will refer to them as conventional gas as technology advances.

The Natural Gas Rush

Thanks to Exxon's entry into natural gas, it may be the shot heard around the energy world that sends a message that natural gas has a bright future. A greater interest in natural gas could provide the needed resources to ensure the entire drilling and extracting process is safe.

"Once burned off by oilmen as a nuisance, gas has attained a charmed image as the elixir that could deliver both energy security—take that, OPEC!—and clean energy—take that, King Coal!" writes Jim DiPeso of The Daily Green.

Massachusetts Democrat and House Energy and Commerce Committee's energy subcommittee chair Ed Markey has argued with Exxon many times with regard to policies. However, Markey supports Exxon when he states the company's merger with XTO "signals a 'fundamental shift' in America's energy markets. The shift, he explained, is the boom in 'shale' gas that has attracted Exxon and other big players in the energy world."

Hydraulic Fracturing in Shale Gas Plays

To reach the deposits, the companies working in shale gas plays use hydraulic fracturing, also known as fracking. Even though natural gas from shale burns cleaner than oil and coal, many residents worry that the drilling process contaminates the drinking water.

A report from the Environmental Working Group says that it has linked fracking to polluting the drinking water and causing property damage. As a result, the group recommends implementing Safe Drinking Water Act safeguards for hydraulic fracturing.

Exxon prepared for the possibility that the government could declare hydraulic fracturing illegal by adding a clause to its contract with XTO that lets the company off the hook. Nonetheless, natural gas has lots going for it and a couple of challenges along the way.