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Friday, October 26, 2012

Oil and gas industry report finds fracking’s risks loom large


According to a report released in May by BDO USA, LLP, an accounting and consulting firm, the booming U.S. oil and gas industry is increasingly focused on environmental risks of their operations.  BDO’s analysis of most-recent 10-K filings of the 100 largest U.S. oil/gas exploration and production companies showed a “striking increase in environmentally-focused risks.”   

Regulatory and legislative changes were cited by 100 percent of companies. “Yet this year”, BDO said, “those regulatory risks are tied directly to public anxiety over the environmental ramifications of shale gas extraction.”  A full 74 percent of oil and gas companies cited hydraulic fracturing regulation as a risk factor, up from 52 percent in 2011. Liabilities related to pollution jumped 33 percent (59 percent in 2011 to 79 percent in 2012), and litigation risks were cited in 70 percent of filings, compared to just 48 percent in 2011.
Indeed, eleven of the top 25 risk factors cited stem at least in part from the use of water and chemicals in fracking:
2012 Rank
Risk Factor Cited in 10-K Filing
2012
2011
1
Regulatory and legislative changes and increased cost of compliance
100%
100%
3 (tie)
Operational hazards including blowouts, spills and personal injury
98%
97%
5
Natural disasters and extreme weather conditions
95%
96%
7 (tie)
Environmental or health restrictions and regulations
94%
94%
11
Inadequate or unavailable insurance coverage
88%
87%
15
Reliance upon third party transportation and processing facilities
80%
83%
16 (tie)
Liabilities for pollution resulting from current or previous operations
79%
59%
19
Financial risk associated with partners, customers, or suppliers
75%
75%
19 (tie)
Increased operating costs
75%
67%
22
Hydraulic fracturing regulation
74%
52%
24
Litigation and other legal proceedings
70%
48%

The list tracks very well with a similar list of risks described in a KPMG white paper that I used to argue for a business case for squeezing the water and chemicals out of fracking.
Incremental progress toward this goal is being made by the industry; however, it is not fast enough.  Accelerating the pace is in the interests of society, the environment, and the industry’s bottom line.  

Wednesday, October 24, 2012

I'm quoted in The Harvard Political Review

I'm quoted in "The Natural Gas Debate" in The Harvard Political Review.


Gas climate gains up in smoke?

Does natural gas burn cleaner than coal when it comes to carbon dioxide emissions, and in the emissions of other harmful pollutants?  Undoubtedly yes.  If you actually burn it, that is.

And there's the problem.

Thanks to rising natural gas prices, coal has made a comeback in the U.S. electricity generation mix.  That trend, if sustained, would reverse both the drop in U.S. carbon dioxide emissions to a 20-year low and the recent dramatic gains in cleaning the air and improving public health.

As I wrote here, what the invisible hand of the market giveth, it can taketh away.  The climate and public health gains enabled by shale gas development are insecure, as the latest numbers show.  Natural gas exports, if approved, will take us further in the wrong direction. 

With gas prices bound to rise further as the market comes into balance, there is no substitute for energy policies that would minimize the emissions from coal and transform natural gas into a near zero carbon fuel while propelling growing renewable energy development.  

Otherwise, the potential - and urgently needed - climate gains from shale gas will be another lost opportunity on the way to a devastatingly warmer world