They frack because clear air and water aren’t profitable

The true costs of resource extraction are never borne by energy and mining companies because they can dump the costs onto society. Those engaged in fracking are not going to act any differently, and can’t be expected to act any differently.

Having government in their pockets means they do it because they can, but the reasons go well beyond that. Pleading for them to act responsibility is of no use as capitalism requires them to act in socially irresponsible ways. Companies with stock traded on exchanges are legally required to earn the biggest possible profit on behalf of their shareholders, regardless of any other considerations. The rigors of competition also mandate this: If a company doesn’t grow, its competitors will and put it out of business.

Photo by Marc St. Gil

One route to increasing profits is to shed as much cost and liability as possible. Indeed, a company would be shirking its legally mandated fiduciary responsibility were it to accept its responsibilities. For an energy company, these are considerable. Massive oil spills, contamination of water, degradation of soil, destruction of forests, mountaintop removal (with the debris dumped into valley streams), greenhouse-gas emissions — the list is long. But although the profits from these problems accrue to the corporations responsible, the costs aren’t charged to their bottom lines. Citizens pay for this, in many ways.

Hydraulic fracturing — the natural gas extraction process commonly known as “fracking” — promises more of the same. Fracking may prove to be profitable to the energy companies doing it, but what about the cost of ruined water supplies, soil contamination and other problems sure to follow? What is the price of clean air and water?

It doesn’t count as pollution if we say it doesn’t

Fracking is a technique in which hydraulic fluids — a mixture of water, chemicals and sand — are forced into wells to create pressure that cracks the rocks, allowing the gas to escape and flow out of the wells. Although the energy industry claims this technique has been used “safely” for decades, today’s fracking, intended to extract natural gas that until now had been uneconomical to tap, is different than previous techniques. A Food & Water Watch report on fracking says:

“[T]his next generation of horizontal fracking into hard rock is significantly different from traditional vertical well fracking. It is far more powerful — and more dangerous — than drilling methods used in the past. … Economically releasing gas from these tighter hard rock deposits requires more force, new techniques and a potentially toxic brew of chemicals to access the gas. … [D]rillers inject a mixture of water, sand and chemicals (often toxic ones) known as ‘slickwater’ fracking fluid to suspend the sand and prop open the fractures, as well as lubricants to speed the fluid into the well. In 2011, the [U.S. Environmental Protection Agency] estimated that 70 to 140 billion gallons of water are pumped into 35,000 fracking wells annually.” [citations omitted]

Although newly developed fracking techniques represent an intensification, they are largely exempt from oversight. The Energy Policy Act of 2005 exempts fracking from regulation under the Safe Drinking Water Act. This exemption, sometimes referred to as the “Halliburton loophole” and shepherded through Congress by on behalf of his former company by Dick Cheney during the Bush II/Cheney administration, amended the Safe Drinking Water Act to “exclude … the underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities.’’

Graphic by geologist Mike Norton

The Halliburton loophole also changes the definition of a “pollutant” under the Clean Water Act so that, according to the text of the Energy Policy Act, “this term does not mean … water, gas, or other material which is injected into a well to facilitate production of oil or gas.”

Energy companies have gotten what they have paid for. A study by Common Cause reports that, from 2001 to 2011, companies engaged in fracking spent $726 million on lobbying and another $21 million in campaign contributions to members of Congress. The American Legislative Exchange Council (ALEC), the corporate lobbying organization that writes “model bills” for state legislatures, has its hand in this process as well, Common Cause reports:

“Prominent financial backers of ALEC’s activities include the American Petroleum Institute, ExxonMobil, and Koch Industries, owner of the largest network of natural gas-transmitting pipelines in the country.”

Health and environmental damage from fracking

The health costs of fracking are considerable. A report by Environment America details some of the costs of ongoing fracking operations and potential costs of proposed fracking. Among them:

• Contamination of drinking water in Colorado and Pennsylvania has cost hundreds of thousands of dollars to mitigate for a handful of homes.
• If fracking were to degrade the New York City watershed with sediment or other pollution, construction of a filtration plant would cost approximately $6 billion.
• The inhalation of dust kicked up from silica sand, which is used in fracking, causes long-term health problems, including lung cancer. Dust-induced occupational ailments, including silicosis, imposed $50 million in medical care costs in the United States in 2007.
• Air pollution from gas drilling in Arkansas’ Fayetteville Shale region imposed estimated public health costs of more than $10 million in 2008.

The environmental group Catskill Mountainkeeper, in a report noting the threat of contamination from floods overwhelming wells — New York state’s Catskills mountains have been hit hard by a series of floods in recent years — said a range of serious illnesses could take root from fracking:

“Fracking wastewater not only contains the toxic and hazardous chemicals used in fracking fluid but also contains contaminants that it picks up from deep within the earth, most notably salty brine and radioactive materials. The documented health consequences of exposure to these toxins include increased rates of asthma, infertility, ADHD, autism, diabetes, thyroid disorders, brain disorders and many types of cancer.”

Then there are the environmental costs. Some of these, Environment America reports, are:

• The clearance of forest land in Pennsylvania for fracking could lead to increased delivery of nutrient pollution to the Chesapeake Bay, which already suffers from a vast nutrient-generated dead zone. The cost of reducing the same amount of pollution as could be generated by fracking would be approximately $1.5 million to $4 million per year.
• Emissions of methane during well completion from each uncontrolled fracking well impose approximately $130,000 in social costs related to global warming.
• The truck traffic needed to deliver water to a single fracking well causes as much damage to local roads as nearly 3.5 million car trips. Pennsylvania estimated in 2010 that $265 million would be needed to repair damaged roads in the Marcellus Shale region.
• The five Pennsylvania counties with the heaviest Marcellus Shale drilling activity saw an 18.5 percent reduction in milk production between 2007 and 2010.

The Star-Telegram newspaper of Fort Worth, Texas, reported in 2012 that the Texas Department of Transportation estimates that repairing roads damaged by truck traffic related to oil and gas drilling would cost $2 billion, money it does not have.

But good luck getting the polluters to pay

Across the United States, federal and state requirements for financial guarantees to cover potential damages are inadequate to protect the public, according to Environment Texas. In most jurisdictions, drillers must provide guarantees to cover the cost of plugging a well but but require nothing toward any environmental damage. An Environment Texas report says:

“Bonding levels are much too low — only eight states require drillers to post bonds of $50,000 or more per well for plugging and reclamation at well depths commonly reached by fracking, despite documented instances in which fracking wells have cost $700,000 or more to plug. In addition, most states have “blanket bonding” options that further reduce the amount of financial assurance a driller must provide — in some cases to less than $100 per well.”

Although the full list of chemicals used by drillers is secret, those most commonly used are known. Dozens of them are listed on FracFocus, the national hydraulic fracturing chemical registry managed by the Ground Water Protection Council and Interstate Oil and Gas Compact Commission, organizations formed by state regulatory agencies. Hydrochloric acid, ethylene glycol (a poison used as an antifreeze), petroleum distillate (which attack the respiratory and central nervous systems), naphthalene (causes liver and neurological damage) and ethanol (a gasoline additive) are among the chemicals commonly used in fracking.

The economics don’t make sense, either

A remarkable level of potential long-term damage — for what? Proponents of fracking argue that short-term financial gains and the release into the market of new natural gas supplies will both be beneficial. But Deborah Rogers, executive director of Energy Policy Forum, in testimony she gave to the U.S. Senate Committee on Energy and Natural Resources, said there is not necessarily a gusher of gas waiting to be tapped:

“Shale wells deplete alarmingly. Overall field declines are running at the troubling rate of 30%-50% per annum. It will take approximately 7,000 new wells every year at a staggering cost of about $42 billion simply to maintain a flat production profile. Moreover, every shale gas play in the U.S., with the exception of the Marcellus, has already peaked and is in decline. Some have gone through almost a complete life cycle in a matter of a mere five years or so, negating entirely the notion of plentiful supply for 30, 40 or even 50 years. Even the Marcellus is showing signs of late middle age.

Financially, shale gas companies are struggling. The popular notion that these companies intend to provide a cheap and abundant product out of the goodness of their hearts to effect a manufacturing renaissance is nonsensical. Companies are in business to make a profit, not provide cheap inputs to the detriment of their own bottom line.”

The economics of natural gas are not robust. The U.S. Department of Energy’s Energy Information Administration reports that the July wholesale price of natural gas (the latest for which it has data) is US$5.54 per thousand cubic feet, while import and export prices are both less than $4 per thousand cubic feet. But the cost of producing gas via fracking is considerably higher. A commentary in The Financial Times says the full cost of finding, developing and operating shale gas wells, paying an average return on capital to investors, requires a spot gas price of $7.50 to $8 per thousand cubic foot.

In other words, to make fracking profitable, natural gas prices will have to rise significantly, thereby canceling the alleged consumer price benefits of producing more gas by any means available.

The good news is that resistance to fracking is steadily increasing. France and Bulgaria have national bans on fracking, grassroots protests are frequent occurrences in Britain, and Germany is considering a ban in certain regions under pressure from brewers. The Czech Republic in 2012 passed a temporary ban, while various local and regional bans are in place in Argentina, Ireland, Switzerland and the United States.

Opponents of fracking face an uphill swim because “market forces” are arrayed against them. Markets are nothing but the aggregate interests of the most powerful industrialists and financiers, and multi-national energy companies hungrily looking for new profits are certainly among them. To them, pollution, environmental destruction and health damage are “external” to their bottom line and they need not, and will not, consider them. Those costs are borne by those affected by their operations, while the profits accrue privately.

Such is the logic of capitalism — of allowing the “market” to decide ever more social questions. Fracking is a continuation of the taking of the commons, the process of privatizing nature and public spaces for private profit. As the proverb says, you can’t eat money when there is no more useable air and water but putting that idea into practice will require a more rational system.