Fracking and Commercial Real Estate

By now, news of the Marcellus Shale's untapped natural gas reserves is probably common knowledge. If estimates hold true–and surely, this is a big “if”–the value of recoverable natural gas could total $1.4 trillion. Ultimately though, such estimates are constrained by available technology, which currently centers on hydraulic fracturing (known as “fracking”). While this technique is time-tested and accepted as industry standard for gas extraction, the sheer size and scope of exploration projections have some worried about its environmental impact. More specifically, “environmental groups have charged that chemical additives used in fracking have contaminated drinking water supplies.”

A recent Duke University publication did in fact note that “no evidence for contamination of drinking-water samples with deep saline brines or fracturing fluids” could be found, though, rather than dispel initial concerns, other findings in the report have only fueled further examination Indeed, Energy Secretary Steven Chu has announced the formation of a seven-member panel to recommend “best practices for the safe extraction of shale gas.”

Where does commercial real estate fit in this story? Well, considering the estimated economic and infrastructure-related impact of gas exploration, there will be tremendous pressure placed on regional housing and office markets. In theory, in order to meet the growing demand, expansion will be necessary. Or will it? For those currently building on speculation alone, perhaps your counted your chips too soon and failed to properly account for legislative risk. One bill, the Fracturing Responsibility and Awareness of Chemicals (FRAC) Act, carries with it tremendous change–change that could derail shale gas development.