On Thursday, new water disposal regulations go into effect in the state of Pennsylvania. Certain treatment plants in the state will no longer be permitted to accept water taken from natural gas wells following hydrofracking. The state was concerned that the dissolved salts and other minerals or chemicals in the waste water could not all be removed by the treatment facilities. Starting Friday, waste water has to either be recycled and reused or taken to other disposal locations. The principal disposal method for the fluids seems to be injection wells in Ohio. The water and dissolved materials will be injected deep into the ground at these facilities.
These changes in regulations will raise the cost of drilling in Pennsylvain for many of the E&P companies. In view of this, I have received questions asking if this change will be of any benefit to Gasfrac Energy Systems (Symbol GFS:CA or GSFVF on the Pink sheets). The simple answer in the short run is no. Gasfrac has no operations in Pennsylvania at the moment. It did complete wells there in the past, but for now, the GasFrac operations in the USA are centered in Texas. Further, Gasfrac has a backlog that ought to keep its equipment operating at full tilt over the next six months at least, so there is no excess to send to Pennsylvania. On the other hand, GasFrac will be taking delivery of four new sets of equipment next fall. If the wastewater regulation changes crate a large demand for the waterless completion services furnished by GasFrac, it may well be that some of this equipment will end up in the Keystone state. Simply put, this is yet another reason why Gasfrac remains such a compelling buy.
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