Fracking: Do the Economics Justify the Risks?

fracking

Hydraulic fracturing, a process to release natural gas and oil from the ground, is the focal point of several controversies involving environmental law and policy, economic growth, and public health. Advocates see the process, known popularly as fracking, as a vast source of natural gas that can provide energy independence for the United States while potentially offsetting some of the many environmental downsides of coal, most notably high carbon dioxide emissions that contribute to climate change. Advocates also argue that fracking has the potential to spark a renaissance in U.S. manufacturing by boosting jobs based on lower-cost industrial inputs.

But those concerned with fracking’s environmental impact on air and water quality, along with its potential to delay adoption of more expensive sustainable energy sources, cite numerous reasons for limiting fracking’s development.

In an effort to illuminate some of the nuances of this energy debate, the Penn Wharton Public Policy Initiative recently held a seminar titled, “Fracking, Environmental Policy, and Economic Growth,” moderated by Sarah Light, a professor of legal studies and business ethics at Wharton. The other participants were: Kathryn Klaber, former CEO of the Marcellus Shale Coalition, the largest organization representing companies involved in Pennsylvania’s natural gas drilling boom; Scott Perry, deputy secretary at the office of oil and gas management at the Pennsylvania Department of Environmental Protection (DEP), and Trevor Penning, director of the Center of Excellence in Environmental Toxicology at the University of Pennsylvania Perelman School of Medicine.

There are many concerns about the impact of hydraulic fracturing on public health, safety and the environment, Light noted at the beginning of the discussion. That is not surprising given that fracking involves the high-pressure injection of water and chemicals into the ground to split shale rock apart to release the hydrocarbon sources that had been locked inside. “The rhetoric is heated on both sides,” Light said. “Not only is there disagreement about policy choices, but there is also sometimes disagreement about the facts underlying those policy choices.”

“Not only is there disagreement about policy choices, [but] there is sometimes disagreement about the facts underlying those policy choices.” –Sarah Light

Concerns about air and water safety have led officials in New York, Vermont and elsewhere to impose moratoriums on fracking. Other critics worry that fracking ultimately is a short-term economic fix that could, over the long term, crowd out investment in non-fossil fuels and sustainable alternative fuels, such as wind and solar energy, that find it difficult to compete on price. Some have noted that the relatively lower prices charged for energy produced via fracking do not reflect the substantial, negative environmental and health-related costs they impose on society and the environment. If those costs were accounted for, they say, then sustainable resources would look more price-competitive.

‘A Significant Impact’

The seminar discussion focused on answering three core questions about fracking in Pennsylvania: First, what economic impact does fracking have in the state? Second, what kinds of regulatory oversight exist statewide? And third, has there been enough research about the environmental risks to fully assess fracking’s impact on public health and safety?

Klaber, who headed the Marcellus Shale Coalition until October 22, 2013, argued that fracking has had a positive economic impact. “You start with a lot of prep work [such as] leasing land, which has a huge economic impact on landowners in the U.S…. Well over a billion dollars has gone into securing those leases; by law, a minimum of one-eighth (12.5%) of the value of that gas goes to the landowners.”

Beyond that, “a lot of work goes on in preparing [and] identifying the site. A lot of biologists and [other] jobs in science” are created in that process, Klaber noted, adding that rig construction and moving companies also gain, as do landscaping companies, seed companies and numerous other suppliers of specialized services. Industries dependent on Marcellus Shale employed nearly 232,000 workers in Pennsylvania during the first quarter of 2013, according to the Pennsylvania Department of Labor & Industry.

Beyond that, noted Klaber, more than $2 billion will flow “to the state [through] sales taxes, franchise taxes, corporate income taxes [and] property taxes. About 2,600 local governments are part of this development. All 67 Pennsylvania counties receive a portion of the impact fee, which is a brand-new tax” that generated more than $400 million in 2011-2012. “There really isn’t a corner of this commonwealth that hasn’t had a significant impact — including western Pennsylvania, which lost a lot from the steel industry’s decline — and southeast Pennsylvania, [which suffered] after refineries were abruptly closed down there,” Klaber said.

Enough Oversight?

Scott Perry of DEP noted that his agency oversees “every aspect of [drilling] pad siting, well drilling, waste disposal, transmission line gathering,” and so forth. “Our first primary concern is public safety, and the issue is the sound construction of these gas wells,” he said. “If they are not properly encased and cemented, you could have methane migration cases that pose a direct threat to public safety, in addition to groundwater quality issues.” However, he added, “There have been cases in the past where that [problem] has occurred, so we have acted swiftly to strengthen those rules.”

“We are concerned about our data quality. We have justifiably taken a few beatings in the press over the quality of the data that we have.” –Scott Perry

The agency’s second concern is public health risks, defined as chronic exposure to wastewater or air quality risks. The most significant rule that Perry’s office has adopted to address such issues is “the elimination of the discharge of the wastewater from shale gas development into Pennsylvania’s streams and rivers. This wastewater is very high in salts — and has high levels of barium and strontium (a naturally occurring radioactive material), and the facilities that have historically taken this wastewater do not have the treatment capabilities to remove these constituents.” The result: “We have not just avoided impact on our streams, but the cumulative impacts to our streams and rivers,” Perry stated. “Without any discharge at all, we are preserving the water quality throughout Pennsylvania.”

Regarding air quality, Perry noted that the DEP has completed several short-term and one long-term study. Although the DEP has not identified any air pollutants of concern, it has strengthened requirements for permits involved with compressor stations and, for the first time, has established at-the-wellhead control requirements to reduce volatile organic compound and methane emissions. Additionally, the agency monitors earth-moving activities at oil and gas sites to avoid “erosion and sediment control problems, as well as post-construction storm water management,” Perry said.

However, Perry was quick to admit that his agency needs to improve its performance in some respects. “We are concerned about our data quality. We have justifiably taken a few beatings in the press over the quality of the data that we have. We want it to be transparent so the public knows exactly what we are doing, and if they have questions they can get them in quickly and easily.” Perry also acknowledged some industry concerns about encouraging best practices because that ultimately can lead to regulation. “Incidents lead to regulation,” he pointed out. “And if a broad swath of an industry does not follow best practices, then you can expect to see those best practices become regulations.”

“It would be nice to see some of the impact fee [collected by the state] going to the studies that are really needed to address the health impact of the hydraulic fracturing process in general.” –Trevor Penning

Rejecting the notion that the federal government should play the dominant role in regulating the fracking industry, Perry stated, “Where you have the potential for pollution to transcend geopolitical boundaries, the federal government has an important role — with the [federal] Clean Water Act and Clean Air Act.” Apart from that, “I would question the wisdom of turning over control to the federal government,” he said. “I’ve been with DEP for over 13 years, under both Democratic and Republican administrations. And we have done more in the past five years than the federal government would have gotten done in two decades.”

Are the Risks Fully Understood?

But do scientists always know enough about the many risks of fracking to make sound judgments about those dangers or uncertainties? “When it comes to health risks, there is a distinct lack” of federal research involving risk assessment, hazard identification, hazard characterization and how to mitigate those risks for humans, according to Penning.

In terms of air quality, Penning said, scientists “know what the hazards might be” in the event that certain levels of contamination are recorded from specific quantities of diesel-driven machinery that are used in fracking, such as compressor stations and trucks taking materials to the site. “We [also] know the components of diesel and what their impact can be if we exceed certain levels,” he noted, adding that scientists also know that there is flaring at the wellheads, and they know how such hazards could affect human health if they exceed certain levels, especially for people with asthma, cardiovascular problems or other ailments. The challenge is to figure out whether those levels have been exceeded. “At least, we have wrapped our head around the issues,” said Penning.

But when it comes to the impact of fracking on water quality, there is a “lack of transparency about the composition of the hydraulic fracturing fluids,” he noted. The fluids used in fracking are a complex mixture, Penning pointed out, and the best way to tackle the challenge is not for toxicologists to study each individual component of the fluids, but to understand how they act together.

“It would be nice to see some of the impact fee [collected by the state] going to the studies that are really needed to address the health impact of the hydraulic fracturing process in general,” Penning added. “And when you consider the number — $400 million [collected] — that is a large sum of money. A small fraction of that could actually go into research to answer the questions [about the health risks of fracking].”

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3 Comments So Far

david smukowski

The risks articulated are myopic at best. First, the risks exist globally when we source oil elsewhere, and they are likely not mitigated. Second, what is the risk of losing 5000 lives of soldiers fighting to preserve US access to Mid East oil….about 100%. The question of domestic production should be “how do we expand it to make manufacturing energy costs even cheaper?”. The engineering issues of air and water quality are routine when the will to tackle them is at hand.

Charles Zeitz

One of the worst things life can bring is to see our neighbor get rich.

Fossil fuels have raised the standard of living for billions of people, enough to give many of them spare time, time away from plowing the fields or doing what ever work would put food on the table, provide shelter, and keep them warm. This surplus time and treasure allows for the existence of intellectuals, environmentalists, Ivy League schools, and just for the fun of it, lets throw in the time to engage in non-reproductive relationships utilizing alternative orifices.

So let’s use this spare time to come up with an intellectual argument to keep that neighbor from getting rich instead of us getting off our asses and making solar and wind work. We can blame the energy companies for subverting our efforts and make it harder for them to succeed, of course making it more expensive for both us and our neighbors. Feels better that way.

Paul Heckbert

From this summary, the debate seems shallow. This sounds like debates I heard in 2010.

I would have asked:
Klaber: what is the breakdown of jobs: how many of those are in food services, hotels, drilling, and trucking? Do the jobs move on when the drilling crew moves on to the next site?
Perry: how can you say that the DEP has not identified any air pollutants of concern, when numerous stories of families becoming sick from toxic volatile organic compounds have been reported over the years?
Penning: suppose health studies of the gas industry were adequately funded; what data would you collect? How do we determine if long-term pollution of aquifers or soil is occurring?

All three: discuss the wisdom of allowing frack wastewater impoundments 500 feet from the Beaver Run Reservoir water supply, in Westmoreland County, in light of West Virginia’s water pollution incident in January, 2014.