Abstract: Shale gas is a kind of unconventional natural gas resources that comes from hydrocarbon rich shale formations. In recent years, the advances in horizontal drilling and in hydraulic fracturing, and the fast rising of natural gas price as a result of significant demand pressures, have made the shale gas production economically viable. The US Marcellus shale, which covers an area of about 95000 square miles, is the largest unconventional natural gas reserve in the world. Its recent estimates give 42.47 trillion cubic meters of reserves and 14 trillion cubic meters of recoverable reserves, which can meet the natural gas demand of the USA for more than 20 years. However, the water availability, water management and environmental impacts pose challenges during the Marcellus shale gas drilling and development, triggering national discussions on the sustainable development for energy and environment. According to a Temple University Summit, "Marcellus Shale Natural Gas Stewardship: Understanding the Environmental Impact", it is estimated that each well drilled using hydraulic fracturing (a process which pumps highly pressurized water to break or fracture the shale to extract the gas) will require 1-8 million gallons of water, with much of that water coming back 10-times saltier than seawater. This paper reviews the status of Marcellus shale gas development along with its environmental impacts, such as the effect of the water withdrawal on the water quantity in headwaters and the need for a cumulative impact assessment study on the areas surrounding the drilling sites. The review would provide some insights into the emerging development of shale gas in China. It is suggested that a combined multi-resource assessment should be conducted before the shale gas drilling, especially for the sustainable availability of freshwater in a regional scale. The shale gas development should ensure that the water demands of communities and regional ecosystems are not affected and that water quality and surrounding environments are protected. In addition, infrastructure, laws and regulations along with the drilling technologies and facilities should be combined to reduce water resource risks and environmental impacts of the shale gas development.