By William Fisher
With cleanup of the Gulf of Mexico barely underway, energy companies are already assuming the crouching stance in anticipation of a no-holds-barred attack by environmentalists on what the industry says is the next major breakthrough in natural resource extraction.
The breakthrough is called fracking -- short for hydraulic fracturing -- the process of injecting water and chemicals into reservoirs to fracture rock and free up gas and oil.
Critics say fracking can poison water supplies. They also say it uses large amounts of fresh water and generates large amounts of wastewater with limited disposal options. Hydraulic fracturing injects high volumes of water, chemicals and particles underground to create fractures through which gas can flow for collection.
According to the industry, fracturing has been used in roughly 90 percent of wells in operation today and 60 to 80 percent of new wells will require fracturing to remain viable. The industry contends the process is safe.
But hydraulic fracturing operations have been linked to environmental risks that could have significant financial implications for the companies involved and are leading to increased regulatory scrutiny.
Congress has directed the EPA to study the potential impact of fracking on drinking water, human health and the environment after complaints by residents were seen on the television program, “Sixty Minutes.”
The publicity also captured the attention of shareholder groups, which filed proposals this year affecting a dozen companies involved in hydraulic fracturing, or “fracking,” in which they requested more disclosure on risks.
The fracturing operations involve the movement, storage, and disposal of millions of gallons of water and thousands to tens of thousands of gallons of toxic chemicals.
But because of a lack of transparency, it can be very difficult to learn what chemicals are used by companies. Spills, regulatory penalties, and litigation linked to fracturing operations in been reported in several states where natural gas companies are active. Response votes were very favorable, the groups say.
Of 12 proposals filed, six went to a shareholder proxy vote and were supported by between 21 percent and 42 percent of shareholders.
“We are pleased with the kind of votes we received at the proxy season,” says Larisa Ruoff of Green Century Capital Management, a Boston investment advisory firm focused on environmentally responsible investing. “With the resolution that went to a vote, we’re pleased with the amount of shareholder support for a first-year environmental proposal. In general, most of the votes were incredibly strong.”
Consumer and industry interest has been running so high that the EPA was forced forced to postpone its fourth and final hearing for security reasons.
The decision came less than 24 hours after the agency announced it was moving its hearing from Binghamton University 65 miles north to a Syracuse, New York, convention center.
The EPA criticized Binghamton University, saying the university wanted to raise the amount it was charging from $6,000 to $40,000.
The university said it anticipated as many as 8,000 people and rallies by environmental groups and drilling supporters, which would have required a switch to a bigger campus venue and hiked insurance and security costs.
A new date and location haven’t been set.
The hearing is the fourth and last by the EPA around the country as it prepares to launch a study of hydraulic fracturing,
The hearings are intended to help shape the scope of the study.
Previous hearings were held in Fort Worth, Texas; Denver; and Canonsburg, Pa. The Pennsylvania hearing drew more than 1,200 participants.
The EPA is studying hydraulic fracturing, or fracking, as gas drillers swarm to the lucrative Marcellus Shale region primarily beneath Pennsylvania, New York, West Virginia and Ohio and blast into other shale reserves around the country.
With public input submitted in writing or at the four public meetings, the EPA had planned to complete the study’s design by September, initiate it in January and have initial study results available by late 2012.
Hydraulic Fracturing has drawn the attnetion of Green Century Capital Management, an environmentally responsible investment advisory firm in Boston, and a number of like-minded investment firms.They are coordinating an investor campaign in the United States to promote improved disclosure by natural gas companies about the business and environmental risks of hydraulic fracturing.
The shareholder proposals, filed with 12 companies, asked each to report on the environmental impact of the company’s hydraulic fracturing operations and for a discussion of the potential policies the company could adopt, above and beyond regulatory requirements, to reduce or eliminate hazards to air, water and soil quality from those activities.
Investors contend that recent events make this disclosure more important than ever. Earlier this month, the Pennsylvania Department of Environmental Protection (DEP) ordered EOG Resources to suspend drilling in the state after a blowout at a company well. According to the DEP, “the incident presented a serious threat to life and property.” At EOG’s annual meeting in April, over 30 percent of the shares voted supported the proposal.
Media attention to fracturing and levels of public concern about potential environmental impacts have skyrocketed since 2007.
In June, Sixty Minutes broadcast a story on fracking which left the viewer largely uninformed about what chemicals were being blasted into the ground.
Then a documentary filmmaker, John Fox, took up the issue. His film, “Gasland,” is now available on HBO. It chronicles the recent catastrophic BP oil spill and the environmental effects of the energy industry's efforts to extract natural resources. Fox traveled the country exposing what he says are the unsafe drilling practices of the natural gas industry and its detrimental effects on the environment and communities.
In communities where fracking is a common occurrence, negative effects were common, he says - sick communities where cancer rates were abnormally high, water that could be lit on fire, not to mention generally unsafe drinking water, animals losing hair, and much more. According to Fox, there are 450,000 of these gas wells across the country, with a proposal for 100,000 more in New York and 100,000 in Pennsylvania.
Not surprisingly, the natural gas industry sees things quite differently.
America's Natural Gas Alliance, an industry lobbying group, says the flammable water in Fox's film occurred because the home owner's water well was drilled into a "natural gas pocket." They say another damning scene in the film, in which Fox blames natural gas drilling for a massive fish kill, was also misplaced. An EPA report, they claim, blames coal mine runoff, not natural gas drilling.