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After just publishing an article on Gasfrac Energy (OTC:GSFVF) endorsement by Chevron, I didn't expect to revisit the company so fast. However, the breaking news regarding the likelihood of Gasfrac being the first entrant in New York state fracturing market was too good to pass up.

Yesterday, eCorp, a private company with extensive oil and gas experience in New York State and several other jurisdictions, signed a Memorandum of Understanding (MOU) to develop up to 135,000 acres of land targeting both the Marcellus and Utica shale in the state. The MOU was signed with 200 land owners in Tioga County.

What is of interest to Gasfrac Energy is that eCorp and the land collective have agreed to use Gasfrac waterless Liquefied Petroleum Gas (LPG) fracturing technology; from eCorp's press release:

Plans include proven drilling technology that presents a smaller footprint than conventional rigs and a reservoir stimulation technology using liquefied petroleum gas (propane or propane-butane mix)("LPG"). GASFRAC has successfully employed this technology in North America, pumping over 1,200 stimulations in reservoirs from Alberta, Canada to south Texas, USA.

Further in the release John Thrash, eCorp Chairman and CEO, had this to say:

The use of liquid hydrocarbons to enhance production from hydrocarbon reservoirs is a natural solution; propane is a constituent of natural gas, albeit usually in low concentrations. We believe this game-changing technology will be embraced by, not only regulators and the industry, but the general population as well.

Separately, Mr. Chris Denton, attorney representing the Tioga landowners, had this to say:

The decision to go with GasFrac was based on the environmental benefits of using LPG rather than an effort to speed the process up.

This is a major win for Gasfrac Energy. New York State has instituted a ban on hydro fracturing since the summer of 2008 due to worries about water fracturing environmental consequences. The likelihood of New York's Department of Environmental Conservation (DEC) accepting LPG fracturing is quite high; in the Supplemental Generic Environmental Impact Statement issued last year, the DEC had a favourable assessment of LPG fracturing:

LPG is known to be a good carrier of proppant due to the higher viscosity of propane gel. Further, mixing LPG with natural gas does not „contaminate‟ natural gas; and the mixture may be flowed directly into a gas pipeline and separated at the gas plant and recycled. LPG‟s high volatility, low weight, and high recovery potential make it a good fracturing agent. Use of LPG as a hydraulic fracturing fluid also inhibits formation damage which can occur during hydraulic fracturing with conventional fluids. Using propane not only minimizes formation damage, but also eliminates the need to source water for hydraulic fracturing, recover flowback fluids to the surface and dispose of the flowback fluids.As a result of the elimination of hydraulic fracturing source water, truck traffic to and from the wellsite would be greatly reduced. In addition, since LPG is less reactive with the formation matrix, it is therefore less likely to mobilize constituents which could increase NORM levels in the flowback fluid. LPG is discussed and addressed in the 1992 GEIS in the context of the permitting of underground gas storage wells and facilities in the State. Currently, there are three operating underground LPG storage facilities and associated wells for the injection and withdrawal of LPG, with a total storage capacity of approximately 150 million gallons of LPG. It is quite possible that these storage facilities which are located in Cortland, Schuyler and Steuben Counties could supply the LPG needed to conduct hydraulic fracturing operations at wells.

The DEC did mention however that LPG fracturing availability was limited at the time, that only one company (Gasfrac Energy) offers the process and that the process may be considered immature at this juncture. Those concerns have greatly diminished today as Gasfrac Energy significantly increased its capacity and greatly expanded its presence in the United States.

Furthermore, since LPG fracturing is not included in the ban for hydro fracturing, the application for the process is done under the 1992 permitting guidelines for conventional gas drilling and not the yet to be completed guidelines for hydro fracturing. While additional environmental assessments maybe warranted, the hurdle for approval is substantially lessened in comparison to the complications associated with hydro fracturing.

In addition, Gasfrac's waterless LPG fracturing seems to be gaining political support as well; New York Assembly's Environmental Conservation Committee member Ms. Donna Lupardo had this to say about introducing LPG fracturing in New York:

"This certainly takes the concern over water issues off the table," she said, "and that's a big one, with the whole issue of withdrawals, contamination and treatment." It would not address problems associated with methane migration, she added, which continues to plague shale wells in Pennsylvania, despite stronger standards adopted by the state last year.

While not a complete endorsement, the technology waterless aspect seems to address one of the key concerns about fracturing in New York.

Should eCorp be ultimately allowed to operate in New York through the usage of Gasfrac waterless LPG fracturing technology, this would be a major coup for the company beyond the obvious financial implications. It would offer Gasfrac a unique opportunity to showcase its environmentally sustainable fracturing technology to a vast swath of the US public and may compel other states and even international jurisdictions to choose Gasfrac waterless LPG fracturing as their fracturing solution of choice.

Finally, it goes without saying, developments such as the above further increase the likelihood that major oil service providers such as Halliburton (NYSE:HAL), Schlumberger (NYSE:SLB) or Baker Hughes (NYSE:BHI) may pre-empt one another to take control of Gasfrac and its patented waterless LPG fracturing process, and thus gain control of an increasingly valuable piece of technology.

Disclosure: I am long OTC:GSFVF.