Hydraulic Fracturing: Opportunities and Perils
Posted on Wednesday, May 16, 2012
By Holly Testa
Media stories about hydraulic fracturing-a.k.a. "fracking" range from glowing to apocalyptic. Does fracking represent the American Petroleum Institute's vision of " America's New Energy Frontier" promising the U.S. a 100-year supply of natural gas, or is Vanity Fair's headline of " A Colossal Fracking Mess" closer to the truth? As is usual with complex issues, there are no easy answers.
The Opportunity: Abundant, Cleaner, Domestic
Energy
Shale gas deposits are being exploited throughout the Northeast
United States, the Mountain West, and Texas, with further expansion
expected across the country. Abundant natural gas supplies hold the
promise of reduced dependence on imported oil, lower energy prices,
improved economies in depressed areas, and lower greenhouse gas
emissions (as compared to the current dominant way to generate
electricity, coal).
The Peril: Unaddressed Problems, Unknown
Costs
The promise of natural gas as a transition "bridge" fuel to a
cleaner energy economy is compromised by inadequate environmental
practices, community impacts from drilling activities, and
inconsistent state regulations-with states struggling to keep
up.
Shale deposits are often beneath populated areas, and wells are often drilled in close proximity to homes. There have been numerous complaints alleging on-site chemical spills, contaminated drinking water, and air quality degradation, and even "flaming faucets."
Industry executives insist that there is no evidence that fracking has ever polluted groundwater, but an EPA investigation into groundwater contamination in Pavilion, Wyoming may prove otherwise. "When considered together with other lines of evidence, the data indicates likely impact to ground water that can be explained by hydraulic fracking," said the preliminary EPA report.
States are struggling to update regulations governing fracking operations. Colorado recently adopted the nation's toughest disclosure rules. Many states are struggling with regulatory structures that have not been significantly updated since World War II.
The "Known Unknowns"
In the rush to secure new energy sources, significant risks that
are not well understood remain unaddressed-including groundwater
contamination pathways and the possibility of triggering
earthquakes.
Also at issue-how much cleaner is natural gas, really? Natural gas
burns cleaner than oil, but substandard procedures used to extract
the gas reduces the advantage. The extent of greenhouse gas
emissions produced by flaring and fugitive emissions is
inadequately measured and therefore unknown.
Investor Engagement
Investors Environmental Health
Network (IEHN) and Interfaith
Center on Corporate Responsibility (ICCR) have joined forces to
press for changes. Recognizing the need for improved corporate
disclosure and a uniform standard of best practices and performance
metrics, these groups have collaborated on "Extracting
the Facts: An Investor Guide to Disclosing Risks from Hydraulic
Fracturing Operations."
According to Richard Liroff, Executive Director of IEHN and primary author, the Guide offers a "road map for companies to respond to the heightened concerns around fracking, and articulates industry best practices that will reduce the risks, and consequently, the impacts."
As an active investor member of IEHN, First Affirmative is engaging with companies for the 2012 proxy season on behalf of clients.