A decision-analytic approach to predict state regulation of hydraulic fracturing

BACKGROUND: The development of horizontal drilling and hydraulic fracturing methods has dramatically increased the potential for the extraction of previously unrecoverable natural gas. Nonetheless, the potential risks and hazards associated with such technologies are not without controversy and are compounded by frequently changing information and an uncertain landscape of international politics and laws. Where each nation has its own energy policies and laws, predicting how a state with natural gas reserves that require hydraulic fracturing will regulate the industry is of paramount importance for potential developers and extractors. We present a method for predicting hydraulic fracturing decisions using multiple-criteria decision analysis. The case study evaluates the decisions of five hypothetical countries with differing political, social, environmental, and economic priorities, choosing among four policy alternatives: open hydraulic fracturing, limited hydraulic fracturing, completely banned hydraulic fracturing, and a cap and trade program. RESULTS: The result is a model that identifies the preferred policy alternative for each archetypal country and demonstrates the sensitivity the decision to particular metrics. Armed with such information, observers can predict each country’s likely decisions related to natural gas exploration as more data become available or political situations change. CONCLUSIONS: Decision analysis provides a method to manage uncertainty and address forecasting concerns where rich and objective data may be lacking. For the case of hydraulic fracturing, the various political pressures and extreme uncertainty regarding the technology’s risks and benefits serve as a prime platform to demonstrate how decision analysis can be used to predict future behaviors.