Is investment in Marcellus shale gas development leading to technology innovation?

In recent years geological studies, economic drivers and government policy have spurred significant investment in hydraulic fracturing activities.  New studies showing that the Marcellus shale formation alone can supply 25% of the country’s natural gas needs within 10 years have prompted many state governments, research institutions and private companies to make large investments in shale gas exploration and recovery.

The spotlight on shale drilling may lead private equity and venture capital investors, research institutions, and entrepreneurs to ask: is all of the Marcellus shale activity spurring investment in new technologies?

One way to assess this is to consider the number of patents and patent applications surrounding the Marcellus shale boom. The focus on Marcellus shale gas recovery technologies began in 2008.  Thus, although the United States Patent and Trademark Office (USPTO) keeps patents and patent applications confidential for the first 18 months after they are filed, the earliest Marcellus shale-related patent applications began to publish in mid-2009.

Surprisingly, a review of USPTO and World Intellectual Property Office (WIPO) records reveals little focus on the Marcellus shale.  As of August 22, 2011, only 11 published U.S. and WIPO patent applications mention the Marcellus formation.  Six of these patent applications relate to remediation technologies – i.e., wastewater and air pollution treatment technologies. The other five relate to gas recovery methods and systems – i.e., fracturing methods and related equipment. None of these applications has matured into an issued patent.

However, the number is quite a bit higher when the search moves beyond the Marcellus and considers all patents and applications that mention the term “hydraulic fracturing.”  Between January 2008 and August 2001, approximately 1,100 U.S. patent applications published that mention fracturing, and over 600 such patents granted.  This data actually represents an increase of over 80% as compared to patent filings for hydraulic fracturing technologies in the previous 3-1/2 year period (mid 2004 through January 2008), in which the USPTO published approximately 600 such patent applications.

These numbers pale in comparison to patents for “green” energy technologies.  For example, a search of USPTO records over the same time period revealed over 2,300 issued patents that mention renewable energy.  In addition, USPTO statistics show that in a similar time period over 4,000 patent applications were submitted to the USPTO’s Green Technology Program (which includes renewable energy technologies), and the USPTO accepted over 2,500 of those applicants for the program.

The simple keyword-based searches described above represent only a quick assessment of patents involving shale technologies. However, they can provide a rough assessment of the research and development activity surrounding shale gas extraction as compared to that for renewable energy and related technologies. The statistics showing that recent renewable energy/green technology patent filings more than double the patent filings relating to hydraulic fracturing may reflect the fact that hydraulic fracturing is a relatively “mature” technology, as it was first proposed over 100 years ago and first used commercially in the United States in 1948. In fact, as early as 1957 the USPTO was granting patents covering hydraulic fracturing techniques.

The statistics are timely in view of recent reports that many state governments are shifting their funds and energy policies away from renewable energy technology and toward natural gas extraction. Despite the policy changes, recent patent filing statistics show that renewable energy, remediation and other clean tech developments are still driving innovation in energy research and development.

Although innovation relating to hydraulic fracturing technologies is on the rise, patent filings suggest that renewable energy and other “green” technologies remain much more significant drivers of technology development.

[NOTE:  A version of this post first appeared on the Sustainability Counsel blog, which is published by members of Pepper Hamilton LLP’s Sustainability, Clean Tech and Climate Change Team.]