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Friday, March 28, 2014

Showing the work

Transparency is an essential value that’s often invoked -  but is often missing - in discussions of the regulation of hydraulic fracturing, chemical disclosure, public access to information, and certainly disclosure of fracking risk by oil and gas companies.

The US EPA has been justifiably criticized for various aspects of its approach to and regulation of fracking.  But when it comes to the agency’s Study of Hydraulic Fracturing and Its Potential Impact on Drinking Water Resources, it has been extraordinarily transparent.

EPA has posted this summary report on its December, 2013 technical roundtable meeting, as well as additional technical roundtable materials.  The agency has also posted peer-reviewed papers informing their work, and plans to post future papers as they become available.

EPA has been a model of transparency on this critically important work. 

Thursday, March 27, 2014

Investors give oil/gas industry another "F" on disclosure of fracking risks

Investors are increasingly calling on oil and gas exploration and production companies to fully and transparently disclose the risks they face that are associated with the use of hydraulic fracturing technology.  A 2013 analysis I wrote about here gave the industry a failing grade on fracking risk disclosure. A group of investors who manage combined assets of US$6 trillion have done their own study and found the same failure.

The Principles for Responsible Investment (PRI) is an international network of investors working to incorporate sustainability issues into their investment decision making and ownership practices. They found:   
Global oil and gas production and servicing companies currently provide very limited disclosure of the risks and impacts associated with their hydraulic fracturing (fracking) activity…
The research, which was carried out in late 2013 by global standards and corporate responsibility consultancy AccountAbility, analyses the disclosure practices of 56 global publicly listed companies with exposure to fracking activity across 16 indicators in four key areas: governance and risk management, water quality and use, greenhouse gas emissions and community relations. Information on company disclosure practices were collected from publicly available sources, including annual and sustainability reports, regulatory filings, third-party disclosures and company websites.
Overall, the report found that most firms do not provide a clear picture of their fracking activities and impacts, even within markets where there is a high level of production and servicing activity. The average score across all four indicators was only 21%, leaving significant scope for improvement in disclosure and reporting practices. 

Will investors be able to drive the business case for sustainable shale gas development? Will money talk – or walk – when it comes to shale gas development? And does the oil and gas industry want to take that risk, too?  

Wednesday, March 26, 2014

UK study finds unacceptable rates of natgas well failure in PA

With British Prime Minister David Cameron saying that the country is “going all out for shale” and a rise in citizen protests over the prospects of unconventional gas drilling in the UK,  researchers are looking for information with which to evaluate potential risks. And with a lack of available data in the UK, those researchers are looking elsewhere – including Pennsylvania. And what they’ve found are very troubling well failure rates and violation records.

The study - Oil and gas wells and their integrity: Implications for shale and unconventional resource exploitation – was published in the journal Marine and Petroleum Geology.

This story on the study says: 
The researchers focused on well failures, in which the cement, steel casing or valves failed to contain the oil, gas and drilling fluids. It noted the difference between internal failures, where gas, oil or other chemicals did not leak into the wider environment and external failures, where leaks did enter rocks, water acquifers or the air...
One dataset highlighted found that 8,030 fracking wells targetting the Marcellus shale in Pennsylvania were inspected between 2005-2013 and 6.3% (506 wells) were reported for internal or external well barrier failures...
Analysis of another Pennsylvania dataset of 3,533 wells between 2008-2011 found that one-third were issued with environmental violation notices. These were mostly for surface water contamination, land spills or problems with site restoration. But 2.6% (91 wells) suffered some internal or external well barrier failures, including four blowouts. 

Well integrity is fundamental to safe shale gas development. Failure is not an option. The failure rates found in this study – as well as the violation rates – are unacceptable and should not be tolerated. 

Tuesday, March 25, 2014

An analysis of the landmark PA Act 13 decision

Three professors from Widener Law School have written an excellent analysis of the decision - one that’s accessible to dullard non-lawyers like me. Robinson Township v. Commonwealth of Pennsylvania: Examination and Implications is a must-read.

The case turned on the long-moribund environmental rights amendment of the state constitution that Pennsylvania voters approved in 1971 by an overwhelming 4 to 1 margin. The amendment has been largely ignored since; indeed, the analysis shows that the state government argued last year that the amendment 
“recognizes or confers no rights upon citizens and no right or inherent obligation upon municipalities; rather, the constitutional provision exists only to guide the General Assembly, which alone determines what is best for public natural resources, and the environment generally, in Pennsylvania.” 
So the state Constitution is merely “guidance”? Not so, said the Court, because Article I, Section 27 enumerates 
inherent rights that are reserved to the people; they operate as limits on government power...
The [amendment] establishes two rights in the people…The first is a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment. The second is “a limitation on the state’s power to act contrary to this right.” The state as well as local governments is bound by these rights, the plurality said. In addition, these rights are equal in status and enforceability to any other rights included in the state constitution, including property rights...
...Public natural resources are owned in common by the people, including future generations. Because the state is the trustee of these resources, it has a fiduciary duty to “conserve and maintain” them. “The plain meaning of the terms conserve and maintain implicates a duty to prevent and remedy the degradation, diminution, or depletion of our public natural resources...”
Pennsylvania’s history, [Chief Justice] Castille wrote, includes massive deforestation, the loss of game, and industrialization and coal mining. “It is not a historical accident that the Pennsylvania Constitution now places citizens’ environmental rights on par with their political rights,” the plurality wrote. 
What might be the impact of this decision? 
The most obvious impact of the Robinson Township decision is to force lawyers and decision makers to look anew at the text of Article I, Section 27, and to recognize it as constitutional law...
No Pennsylvania court has ever before articulated the “foundational principles” of Article I, Section 27 in this way, or at this level of detail. In addition, no Pennsylvania court has previously used Article I, Section 27 as a justification for holding a statute unconstitutional. In so doing, the court provided a framework for understanding and applying the amendment that will likely be considered for decades...
Last, the plurality in Robinson Township...observed: “By any responsible account, the exploitation of the Marcellus Shale Formation will produce a detrimental effect on the environment, on the people, their children, and future generations, and potentially on the public purse, perhaps rivaling the environmental effects of coal extraction”...The plurality opinion in particular advances the purpose of constitutional-enshrinement of environmental rights and public trust duties in the first place – to promote environmental protection and advance individual rights to a quality environment for both present and future generations...
It is likely that other courts within and outside Pennsylvania will take notice, even though these views did not command a majority of the Pennsylvania court.

Monday, March 24, 2014

Study: PA taxpayers pay $5K-$10K per shale well for road rebuilding

Researchers from the RAND Corporation and Carnegie Mellon University have found that Pennsylvania taxpayers are paying $5,000-$10,000 in road reconstruction costs for every shale gas well drilled.

Estimating the Consumptive Use Costs of Shale Natural Gas Extraction on Pennsylvania Roadways was published last month in Journal of Infrastructure Systems.  A summary of the study can be found here, and is worth quoting at length:
...local roads are generally designed to support passenger vehicles, not heavy trucks, and [the study found] that "the useful life of a roadway is directly related to the frequency an weight of truck traffic using the roadway."
The study’s findings include:
Heavier vehicles cause exponentially greater roadway damage… “This means that 18,000-pound and 30,000-pound single-axle passes do about 900 times and 7,500 times more damage than a 3,000-pound single axle pass, respectively.”
The estimated road-reconstruction costs associated with a single horizontal well range from $13,000 to $23,000. However, Pennsylvania often negotiates with drilling companies to rebuild smaller roads that are visibly damaged, so the researchers’ conservative estimate of uncompensated roadway damage is $5,000 and $10,000 per well.
While the per-well figure of $5,000-$10,000 appears small, the increasingly large number of wells being drilled means that substantial costs fall on the state: “Because there were more than 1,700 horizontal wells drilled [in Pennsylvania] in 2011, the statewide range of consumptive road costs for that year was between $8.5 and $39 million,” costs paid by state transportation authorities, and thus taxpayers.
“Some external costs, such as air-quality related health problems, are borne by society at large,” the scholars conclude, “but roadway consumption costs accrue directly to the state and local departments of transportation (e.g., PennDOT).” They suggest several potential approaches that…Pennsylvania could take to reduce these costs, including an additional fee or tax on top of current per-well impact fees, limiting truck size and weight, or encouraging the use of pipelines rather than trucks…
A total of over 8,000 shale gas wells are drilled or under development in Pennsylvania, and the state may see seven more decades of drilling. Pennsylvania's current anemic - or perhaps more accurately, miniscule - impact fee is equivalent to the smallest effective tax rate on shale gas production in the USThe RAND/CMU study's three recommendations must be heeded to eliminate an inexcusable subsidy to the natgas industry.