The hydraulic fracturing of shale gas depends heavily on adequate water resources. With the rapid development of shale gas, a significant amount of freshwater is used together with the generation of large quantities of production and flowback waters. Water issues have become increasingly important for shale gas development. To figure out the relationship between shale gas development and freshwater, here we define a freshwater dependence coefficient (FDC), which is ratio between the total freshwater usage (surface and underground freshwater) and the total water demand of shale gas development. In Pennsylvania, an increasing amount of flowback water is reused in shale gas fracturing, which can reduce freshwater dependence. In this paper, we develop a water carrying capacity model of shale gas development using system dynamics. Based on the empirical data from the Marcellus Shale in Bradford Country, Pennsylvania, we analyze the nonlinear relationships between water resources and water management, particularly the relationships between freshwater dependence, the flowback percentage, freshwater dependence and reused flowback under different developnet scenarios. This paper provides a basis for further study on the water carrying capacity for shale development.