Jonathan Schaffner Prof. Mikos ENV 151 June 4, 2013 Hydraulic Fracturing: The Wicked Web The abuse of fossil fuels has dangerously sped climate change and as a result, the sixth mass extinction is on its way. Humans, too, are living organisms on this earth and soon will be the next species to be endangered. In response, governments are searching for alternative energy. President Obama, in an executive order, backed natural gas as an alternative source: “The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy” (Energy In Tonight’s State Of The Union). However, this issue is not black and white. There is a great debate on whether the United States should permit hydraulic fracturing with regulation or enact a complete ban. It is a wicked web ensnaring various groups of society, each with their own reasons to accept or reject the method of hydraulic fracturing. Wherever one stands, the fact of 1
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Transcript
Jonathan Schaffner
Prof. Mikos
ENV 151
June 4, 2013
Hydraulic Fracturing: The Wicked Web
The abuse of fossil fuels has dangerously sped climate change and as a result, the sixth
mass extinction is on its way. Humans, too, are living organisms on this earth and soon will be
the next species to be endangered. In response, governments are searching for alternative energy.
President Obama, in an executive order, backed natural gas as an alternative source: “The
development of natural gas will create jobs and power trucks and factories that are cleaner and
cheaper, proving that we don’t have to choose between our environment and our economy”
(Energy In Tonight’s State Of The Union). However, this issue is not black and white. There is a
great debate on whether the United States should permit hydraulic fracturing with regulation or
enact a complete ban. It is a wicked web ensnaring various groups of society, each with their
own reasons to accept or reject the method of hydraulic fracturing. Wherever one stands, the fact
of hydraulic fracturing is that this method has a false identity of a green and economic answer, as
it is the impetus of human and environmental degradation. The demand for this energy source
can be curbed investigating the drivers for this source and offering transition strategies that have
been successful models throughout society.
Currently, hydraulic fracturing, also known as fracking, is used in nine out of 10 wells in
the United States. It is the practice of injecting millions of gallons of water, chemicals, and sand
down into a well that turns horizontally to tackle more surface area for natural gas. The high
pressure induced creates fractures in the rock layer such as shale that can reach as far as 6,000
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feet under the surface of the earth (What Is Hydraulic Fracturing?). As a result of new hydraulic
fracturing, U.S natural gas production rose 30 percent from 2007 to 2010. The effects of
Obama’s pledge to natural gas are already taking place. Despite this new trend, gas productivity
per well has declined by 36 percent from 1990 to 2009 (McElroy). Natural gas has now become
the green propaganda of the government in a weak attempt to show their concern for the earth.
The interpretation of green energy suddenly became another fossil fuel called natural gas, which
is another short-term solution.
Before offering any transition models, a deconstruction of this wicked web is necessary
by observing the various stakeholders of hydraulic fracturing and understanding the reasoning
behind them. Thus, the first stakeholder is the Federal Government, under the Obama
Administration, which mentioned above, has strongly supported the production of natural gas as
energy of the future, making it a primary and key stakeholder. The main incentives for this
support of natural gas are to change the course of the economy into an economic boom and to
lessen energy dependency on foreign countries. In order to achieve these goals at a faster rate,
the Obama Administration supports hydraulic fracturing as a method, which has increased
extraction from reserves that once seemed depleted (Broder). This boom in domestic oil could
make the United States a key role in world energy uplifting the economy. Hydraulic fracturing
serves as a chance to strengthen the power of the country and corral the support of its people.
Another benefit for the federal government would be the taxes placed on hydraulic fracturing,
allowing these funds to fill state and federal budgets (Natural Gas). The Federal Government has
the political ability to influence the success or downfall of this particular industry.
Another stakeholder involved is dependent on the Federal Government’s lack of
regulation, which is the oil and gas companies. Oil companies, as primary stakeholders, are
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invested in continuing the use of fossil fuels and now natural gas has become their main interest.
There have been amendments to federal laws that restrict the government’s involvement in
hydraulic fracturing. For example, the Environmental Protection Agency enacted the Clean
Water Act in 1972, which established standards for pollution in water. Construction companies
were required to obtain storm water permits for sediment runoff yet hydraulic fracturing, which
puts chemicals in the ground and stores wastewater in pits, is not regulated (Tiemann 29). The
lack of regulation encourages oil and gas companies to integrate any extraction processes no
matter the cost. There is a sense of freedom that enables these companies to expand without the
risk of penalty.
Over the past several years hydraulic fracturing has unlocked a vast new source of energy
supply in the United States. Advanced forms of the process that Tillerson (Chairman, President,
and CEO of Exxon Mobil Corporation) used in the 1970s, combined with innovative methods of
drilling, have enabled energy companies to extract huge quantities of natural gas and oil trapped
in shale rock--assets that were previously thought to be either impossible or uneconomic to
produce. It is widely thought that the U.S. now has 100 years or more of domestic gas supply at
current consumption rates (O'Keefe). Already there has been a frenzy of exploration. A shale gas
boom has turned assumptions about the future of the U.S. and global energy picture upside
down. Less than a decade ago the consensus was that America was beginning to run out of
economically recoverable natural gas and that the country would need to import vast quantities
of it from overseas. U.S. production has increased 28 percent since 2005 as technology has
enabled a shale gas revolution (O'Keefe). In fact, Tillerson is betting much of his company's
future growth, and a good portion of his legacy, on the promise of hydraulic fracturing.
The new discoveries of natural gas, due to hungry companies, have lead to the growth of
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energy-intensive industries, such as the petro-chemical industry, which is a secondary
stakeholder. (Loris). The advancement in hydraulic fracturing has created new market supplies in
natural gas and liquefied natural gas such as ethane, an integral petrochemical feedstock. This
new wave of domestic natural gas with the speedy form of hydraulic fracturing has decreased the
cost of natural gas leading to a decrease cost in liquefied natural gas, which U.S petrochemical
firms regularly use. Thus, these companies have an advantage on companies outside the United
States that use an oil-based chemical called naptha, for their chemical industry (Thompson). For
this reason, Royal Dutch Shell plans to invest a large sum of money in this petrochemical
industry. They have planned to construct a 2 billion dollar petrochemical plant in western
Pennsylvania since it is close to another natural gas site (Loris). This investment illustrates the
positive impact that natural gas has on the petro-chemical industry. The sum of money dedicated
to this plant is evidence that the petro-chemical industry will continue to support hydraulic
fracturing.
According to a analysis of the U.S chemical industry, the U.S market of chemical
production has become one of the most “advantageous” markets in the world since the copious
and low cost amount of natural gas (Loris). This can be exhibited in the petrochemical industry
of Texas. It as has transformed into the forefront exporter in the United State being credited for
17 percent of all U.S exports in 2011, 24 percent which comes from chemicals (Thompson). The
success of the petrochemical industry relies on the continued success of natural gas extraction
through hydraulic fracturing since they depend on cheap ethane. If this process were to slow or if
there was an unexpected decrease in reserves, prices in natural gas would significantly increase
and the chemical industry would take a hit. The petro-chemical industry is secondary stakeholder
since they are dependent on an entirely different industry.
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While industry represents multiple stakeholders in hydraulic fracturing, the power of
industry has a direct effect on the cities and towns in the United States. There are many
beneficial outcomes that fracking can do for small towns. Citizens within these small towns have
the opportunity to benefit from the fracking industry by owning land or mineral rights. When a
person of a community owns land, it can be leased to fracking companies for either store
equipment or used for any part of the fracking process. Most of the time, the citizens that lease
land do not earn a significant amount of money since the payment is recompense for being an
eye sore or for any disturbances caused by fracking. However, citizens have the potential to
make millions of dollars if they own the mineral rights to a piece of property. A mineral right
according to the state of Michigan is the right to extract a mineral of the Earth to receive
payment, which can be in the form of a royalty (Mineral Rights). In small town America, regular
folk are suddenly enticed with the opportunity to strike gold through this industry. Selling land
and watching the company do the all of the work substitute hard labor and failure in other job
opportunities.
The money that is earned by the residence helps boost the local economy. In Carroll
County, Ohio, town officials have reported a 25 percent jump in tax revenue, which people say is
directly correlated with the fracking boom. The town then used this new source of revenue to
expand infrastructure by building new roads, schools, public work buildings and new parks for
the community. Tax dollars are not the only positive effects as larger fracking companies
sometimes provide assistance to these small towns. Chesapeake Energy, which is one of the
larger fracking corporations, has given more than 40 million dollars on just road improvements
(Hall). Another upside to the expanding fracking industry in these smalls towns is that it brings
in new businesses. Places like North Dakota have experienced this, as new businesses were
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developed to accommodate the new workers and expanding population (Hall). More than
benefiting the individual, the hydraulic fracturing industry has revitalized towns making these
areas a point of interest. The town suddenly becomes more well-known and draws in people
form outside of town.
On the other hand, towns and cities have faced economic and environmental issues with
the implementation of hydraulic fracturing within their community. Mentioned in the above
paragraph, Chesapeake Energy, which can provide funding and assistance to these small towns,
is one of the only examples of a company that actually gives back to the town and its people.
Thus, one of the largest problems small towns face is rapid expansion. Not all cities receive
funding to help with the expansion and this causes stress on old infrastructure, which is often not
repaired or replaced by the energy companies. Schools and businesses also have a difficult time
coping with raid expansion. In Williston, North Dakota, the school system is holding over 3,800
students, which is 57 percent over capacity while daycare centers are so full that they have to
turn away children. (Oldham). Companies come in and use towns at their disposal not providing
enough resources, which in turn degrades the once stable community. Furthermore, a lack of
resources in schools can damage the school system, as they are not providing enough for the
children.
With the expansion boom also comes elevated air pollution that is directly correlated with
fracking. In 2011 the Texas Commission on Environmental Quality found that the gas and oil
operations emitted more Volatile Organic Compounds, or VOC’s, than all the trucks, cars, buses
and other types of transportation combined in Fort Worth, Texas. This type of pollution is known
to cause an increase in asthma around fracking sites and towns (Gallay). While some citizens
believe their quality of life is improving through the economy, their true quality of life, which is
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their health, is being put to risk. This then defeats the purpose obtaining a better life when these
townspeople are faced with dense air pollution. Some do not have a choice as their neighbors
may have permitted fracking, which challenges environmental justice with their right to life.
The most horrific issue a small town may face with fracking is water contamination,
which comes from fracking fluid that can leach into the drinking water. According to National
Public Radio (NPR), the Environmental Protection Agency (EPA) has conducted a study that ties
contaminated drinking water to the fracking industry. The test was conducted in the town of
Pavillion, Wyoming where EPA officials found high levels of benzene (a known carcinogen),
synthetic glycol and alcohol all of which are used in fracking fluid. The fracking company
Encana now provides drinking water to the residence of Pavillion at a cost of $1,500 per month
(Shogren). Furthermore, there are many reports of methane seeping into drinking water from
states like Colorado, Pennsylvania, Texas, and Ohio. These high levels of methane can cause the
water to catch on fire. In 2004 in Pennsylvania this type of methane seepage killed three people
when a house exploded (Lustgarten). The physical damage done by hydraulic fracturing out
weighs the short-term monetary benefits. While the dynamic of an economy can always be
altered for better or for worse, the effects of hydraulic fracturing cannot be reversed. Once
contamination seeps into the fresh water source, there is no way to contain it.
A stakeholder that is directly correlated with the towns and cities is the worker, which is
a primary stakeholder. With the unemployment rate sitting at 7.5 percent, some residents of the
United States are looking to this progressing industry, hydraulic fracturing, for a source of
income. Furthermore, according to the IMPLAN model, which predicts job effects in each state,
hydraulic fracturing creates direct jobs that include construction, metal fabrication, truck
transportation, and oil and gas extraction. Hydraulic fracturing creates indirect job opportunities
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in states that do not extract natural gas, that include the production of equipment, chemicals, and
electronics for the hydraulic fracturing industry (Lydersen). The opportunity for work intersects
different states. Residents of Illinois are currently considering this employment since the Illinois
unemployment stands at 9.3 percent (Unemployment Rates Drop in Most States, Illinois
Climbs). With natural gas reserves in southern Illinois, higher unemployment could lead
residents into being independent on this jobs source especially since their unemployment rate is
over the national average. These workers rely on hydraulic fracturing industry to pay for any
living expenses whether it is household bills, school tuition, groceries, or a car payment. Workers
are primary stakeholders. The opening of jobs is dependent on banning or regulating hydraulic
fracturing. Furthermore, if hydraulic fracturing takes place, the health of the worker is put on the
line.
While workers debate whether employment in hydraulic fracturing is worth the time,
consumers are dependent upon natural gas and this demand is continuing to rise. Consumers, a
secondary stakeholder, have used more than 25.46 trillion cubic feet of natural gas. Furthermore,
50 percent of all households in the United States use natural gas. Electric power generation uses
36 percent of natural gas, 28 percent to industrial uses, 16 percent to residential homes and the
remainder is utilized in plant consumption, pipeline construction, distribution, and for vehicles.
The reason why Americans use natural gas over other nonrenewable fossil fuels is the price. A
report by the Energy Information Administration states that in 2011 the average heating bill for
natural gas in America was 732 dollars from October 1st to March 31st compared to heating form
oil, which was 2,535 dollars (What Percentage of Homes in the U.S. Use Natural Gas?). In total,
the consumers saved 1803 dollars. Since natural gas is produced domestically the prices will
remain cheap for years to come.
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Although there is certain ignorance with consumer consumption of natural gas, there are
numerous groups of green advocates that oppose hydraulic fracturing. The environmental groups
recognize the environmental injustice involved. Environmental groups are primary stakeholders
who have been fighting hard and going toe-to-toe with industry lobbyists in favor of strong
regulations and compliance. There are environmental groups that pushed for a two-year
moratorium or delay of any legislation in order to observe the environmental effects hydraulic
fracturing has. However, the Senate recently passed legislation 52-3 in the Senate, which
requires drillers to release the chemicals they use to the public and test the water before and after
fracking. Companies would also be held accountable for any water pollution committed and sued
by the individual citizen (Wallace). Yet, advocates such as is Annette McMichael, a property
owner in Johnson County who belongs to an environmental coalition, does not think this is
sufficient because of the evidence of hydraulic fracturing around the country. Many rural
residents near fracking operations complain of contaminated groundwater, fouled air, clogged
roads with truck traffic, and round-the-clock noise during the fracking process (Drajem).
Environmental groups are informed about the current issues with hydraulic fracturing and will
try to make the government and companies aware of the potential catastrophes. These groups are
active by going to their state capitol to inform representatives of their environmental mission and
concern.
While all these stakeholders are arguing for their position, there is one that is the center
of it all but has no voice. The environment is key to this argument as every single stakeholder
depends on it. Energy companies, especially, depend on the environment because it provides
businesses and organizations with the materials needed to make profits. Nature is unable to
defend itself against these corporations, therefore nature is being impacted in negative manner
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and turning into a chaotic state (Laine). This is why nature should be considered the ultimate
stakeholder since it is fundamentally different from other stakeholders. Seeing that all other
stakeholders depend on nature, its only defense is the defense by others through stakeholders like
environmental groups.
With all these stakeholders having some sort of link to hydraulic fracturing, a deeper
investigation must consider what drives these groups to support or reject this method of
extraction. Thus, the first driver to be considered is the economy. The economy plays a large
role in promoting technology of hydraulic fracturing, as it has become the definer of well-being
in the United States. The increased extraction of natural gas reduces the imports in the United
States, which could slowly stabilize the imbalanced structure of imports versus exports.
According to the organization, Energy Tomorrow, the United States is predicted to be a net
exporter of natural gas by 2020, resulting in cheap energy that reduces electricity cost and land
price, which leads to growth in U.S consumption for the economy (Hydraulic Fracturing Could
Jumpstart Economy). There is this idea that prosperity in the United States derives from
economic consumption. The more one consumes, the greater the circulation in money, which
leads to economic expansion and power.
Increased oil and gas production also lowers the trade imbalance by reducing imports.
Natural gas through hydraulic fracturing has already caused more than $76 billion in U.S Gross
Domestic Product, which has the potential to triple to $231 billion by 2035. Meanwhile, federal,
state, and the local government are reaping in tax revenue to a total of $18.6 billion across all
levels in 2010 (Hydraulic Fracturing Could Jumpstart Economy).
The previous year, companies drilling the Marcellus Shale contributed $400 million in taxes
(Where Is Hydraulic Fracturing Occurring and How Has That Impacted Local Communities?).
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Hydraulic fracturing becomes a key source in income as it can influence the deficits all around
the United States.
The Obama Administration views hydraulic fracturing to obtain this domestic resource as
a solution to the effects from the economic downturn in 2008. Yet, the United States is choosing
the wrong economic model to follow as they are depending on a finite resource that will
ultimately ruin the economy with its detrimental environmental effects. A successful economic
model the United States should follow is Germany, which transformed its model into a low
carbon economy. One of the pivotal polices involved, which the United States should concede to,
is the energy tax reform implemented between 1999 and 2003. According to How Germany
Became Europe’s Green Leader, the revenues of the energy tax reform have been almost fully
returned to taxpayers, with the largest share used for a gradual reduction of social security
contributions. For example, 16.6 billion euro was collected in revenue from this tax reducing
labor costs and pension contributions. (Michael Mehling, et al 57). Furthermore, the incentive to
reduce energy consumption through this reform has inspired the German industry to create
energy-efficient technologies that is one of the fastest growing exports in the country. According
to Michael Mehling, et al, this reform has “strengthened” the German economy through
efficiency whether from the decrease of utility bills to avoiding economic fluctuations as a result
of dependency on oil and gas (57). Germany is the process of transforming the energy crisis into
in energy surge with their reform that sparked sustainable actions. It illustrates a closed loop
system as German energy taxpayers eventually benefit through revenue in different realms of the
economic sector.
To promote renewables in order to do well in the energy tax reform, the German
government enacted the feed-in tariff policy, which is a renewable energy policy. These policies
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ensure grid access for renewable technologies and offer at least a 20 year contract to show
commitment in developing these technologies (Michael Mehling, et al 58). In the long run,
investment in these technologies coincides with the energy tax as new industries are formed that
the spur the economy. Considering that the United States has more land than Germany, the
country has more access to natural and renewable resources. However, Mehling, et al cites that
Germany was able to pass this policy because all major German parties support a low-carbon
economy while the United States is divided over climate change policies (Michael Mehling, et al
59). Thus, the United States is not entirely invested in this idea and as a result, there needs to be
a culture change in order for the economy to go in this direction.
A byproduct in investing in a renewable economy would be reducing the environmental
costs of industry. An example of the environmental effects of an unsustainable industry can be
witnessed in China. Although the United States is not at the level of pollution China is currently
at, China is good indicator for the potential environmental effects based on the economic model.
According to the Review Of Environmental Economics & Policy, the total environmental damage
caused in China in 2002 was valued at 213 billion yuan, otherwise known as 27 billion U.S
dollars. Within that percentage, 49 billion yaun is contributed to mortality from environmental
health effects (Jing, Cao, Mun S. Ho, and Dale W. Jorgenson 200). To put this in a global
perspective, environmental damaged caused by humans was 11 percent of the world’s GDP at