Frapping the Fracking Fracas
by Fred E. Foldvary, Senior Editor, 8 October 2012“Fracking” or “hydrofracking” derives from “hydraulic fracturing,” a method of extracting oil and natural gas from shale deep in the ground. Water, sand, and chemicals are pumped at high pressure into the rock layer to create fissures, i.e. cracks or fractures, which enable gas and oil to flow into a wellbore. Fracking has been used since the 1940s, but better horizontal technology has greatly expanded the practice.
Advocates of fracking say that the method has greatly increased oil and gas production, reduced the price of energy, created much employment, and decreased oil imports. Critics of fracking say that the process uses up much fresh water, blocks off much land from farming and grazing, and uses harmful chemicals that, despite attempts to contain them, leak into ground water.
The claim by some fracking critics that the deep-injected fluids contaminate groundwater is not justified by the geological physics. Between the shale and the ground water above it there is several thousand feet of rock that prevents the cracks from expanding to the surface. Moreover, the fracking fluid is too dense to rise up through the fractures. However, methane from shallow deposits of natural gas has contaminated groundwater near some fracking sites.
An article that deplored fracking appeared in the September 19, 2012, SF Weekly: “Boom or Doom: This Environmental Disaster Is No Gold Rush,” by Denise Grollmus. Much fracking has occurred in Pennsylvania, where thousands of complaints have been submitted. Toxic chemicals contaminated the Monogahela river near Pittsburgh. Thereafter, New York State banned fracking while it conducts a public health study.
Two strong political forces are clashing on the fracking fracas. The oil and gas industry lobbies have paid hundreds of millions of dollars to campaign funds to prevent having to fully compensate for the damage it causes. Landowners who lease sites to energy companies obtain substantial rent and add to the political forces in favor of fracking. The thousands of workers newly employed in the production of natural gas are another potent political element.
These pro-fracking interests create regulatory capture, in which the regulators serve the regulated interests rather than the general public. Pennsylvania law allows drillers to extract gas from properties near leased land without any contract or payment to the nearby title holders. The Bush-Cheney administration pushed Congress to exempt fracking from the Safe Drinking Water Act. Allegedly scholarly studies of fracking pollution are sometimes funded by organizations such as the American Clean Skies Foundation, founded in 2007, with ties to the energy industry.
In opposition, vigorous environmentalists seek to completely ban fracking rather than just regulate it or require the industry to fully cover the costs of water and contamination. While greater use of natural gas rather than coal and oil would reduce air pollution, contamination from the fracking process may offset this gain. Methane evaporates from holding tanks and contributes to greenhouse warming. The tarps that hold the dumping ponds sometimes tear, leaking out toxic water containing chemicals such as benzene, methanol, formaldehyde, hydrochloric acid, arsenic, barium, and lead. Pipes leak, tap water turns brown, and creek water becomes red. Trucks transporting waste water do not always obey laws and property rights. There are many tales of water faucets that flame when turned on, and children and animals sickened and dead from the pollution. Environmentalists have also blamed fracking for generating some earthquakes close to the wells.
The economic cost-benefit perspective provides the optimal policy, that which would prevail in a pure free market. The ideal environmental policy has two rules: polluters compensate for the full long-term social costs they cause, and users pay to the relevant communities the value that arises from natural resources. The pollution costs should be paid from a combination of a periodic general compensation and damage payments to individuals for particular cases. Simply banning a product or production method is usually not the most effective method. Let the cost to the producer exceed the benefit, and the process will stop by itself.
Economic analysis has to go beyond advice as if to benevolent despots, to the political context that blocks the optimal solution. The special interests exert both financial and voting pressure on elected officials and appointed boards. Practical policy prescriptions have to also confront the political realities.
Those who seek justice and environmental protection need to base their policy prescriptions on both geological science, economic analysis, and political forces. We live in a world where the flawed political process may well make the more dubious remedies more politically feasible.
-- Fred Foldvary
Copyright 2010 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
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