Legal & Regulatory

Fracking Fissures: Will Politics Impede Production?

They call themselves “Fractivists.”

Environmental and community activists fearful of relatively new natural gas and oil drilling technologies that have transformed the U.S. energy economy have launched a high-profile, highly hyped campaign to shut down new natural gas production. But their prospects of success look dodgy.

Ground Zero in the debate over fracking—shorthand for the combination of horizontal drilling and hydraulic fracturing to extract oil, natural gas, and natural gas liquids trapped in tight shale formations—has turned out to be Colorado. The state, long one of the nation’s top 10 oil and gas producers, is also home to a large and feisty environmental movement, mostly located outside of the areas where fossil fuels traditionally have ruled. Historically, most of Colorado’s oil, gas, and coal has been produced in the Rocky Mountain area west of the state’s most populous region. Fracking has changed that geography, moving energy production to Colorado’s eastern plains.

Colorado politics today features a running dispute over whether local governments can ban fracking in their communities. Two potential November ballot initiatives—both aimed at stalling oil and gas development—have divided the state’s Democratic Party. They could lead to Republicans winning major elections in a state that has shifted from Republican red to Democratic blue and that can clearly now be counted as purple.

Political Implications

The fracas over fracking jeopardizes the reelection of freshman Democratic Sen. Mark Udall, son of the late, legendary environmental legislator Morris K. (Mo) Udall (D-Ariz.), long-time chairman of the House Natural Resources Committee and author of dozens of environmental laws ranging from strip mining regulation to federal land policy to nuclear waste disposal. Both Democratic Gov. John Hickenlooper, also up for reelection, and Udall have tried to position themselves in opposition to fracking restrictions. Both are in tight races, although most political prognosticators put Udall in the greatest jeopardy. Their Republican opponents are tying them to the environmental groups that support restrictions on oil and gas development. Attacking fracking appears to be a losing proposition in the state.

Polling indicates that most Coloradans support continued and expanded oil and gas exploration. The environmentalists’ ballot measures go against that flow. The two initiatives, largely the result of work by Democratic Rep. Jared Polis, would give Colorado communities the authority to ban the technology and, second, ban gas wells closer than 2,000 feet from homes and hospitals. At the same time, energy industry interests have been advancing a ballot measure that would deny state revenues from oil and gas development to communities that banned horizontal drilling and hydraulic fracturing.

Polis, who represents the Boulder-area district where Udall was the congressman before he was elected to the Senate six years ago, allied with local activists to craft the ballot measures. But in early August, Udall and Hickenlooper prevailed upon Polis to withdraw his support for the environmental groups’ initiatives.

The deal between Polis on the one hand and Hickenlooper and Udall on the other calls for Polis—who has reportedly spent millions of dollars of his own money on the initiatives—to now withdraw support for them. In return, Hickenlooper would create a state government-sponsored commission to recommend how to best address local communities’ concerns over fracking. As part of the deal, the industry would drop its ballot measure denying revenues to communities that adopt fracking bans.

According to the website Ballotpedia, which tracks ballot measures across the country, none of the fracking measures will appear on the Colorado ballot, reflecting the deal among anti-fracking forces, Hickenlooper and Udall, and the oil and gas industry. According to an account on the Breaking Energy online news site, fractivists including Cornell University’s Anthony Ingraffea are working to get themselves appointed to a commission that Hickenlooper agreed to establish as part of the compromise to kill the ballot initiatives.

Court Battles

At the same time as the politics of the ballot initiatives were playing out, two Colorado judges struck down local ordinances passed by cities along the Colorado Front Range (directly east of the Rockies) aimed at limiting the drilling technologies. Fracking in Front Range shale formations has increased the state’s production of natural gas by 20% and more than doubled state oil production. State court judges killed fracking bans by Fort Collins in Larimer County and Longmont in Boulder County, finding them in violation of state law, which reserves oversight of oil and gas development to state bureaucrats.

Colorado is only the highest-profile case of the political assault against hydraulic fracturing (and, indeed, against natural gas). Merrill Mathews of the Institute for Policy Innovation, a libertarian-oriented think tank in Texas, wrote recently in the Wall Street Journal, “More than 170 New York towns and cities have used zoning laws to restrict or prohibit fracking, and in June New York’s Supreme Court turned back a challenge to these zoning laws. Pennsylvania allows local municipalities to restrict fracking, while Colorado and California are struggling with the issue.” (For more on California, see the sidebar “Monterey Shale.”)

Monterey Shale

A promising shale deposit in California, the Monterey Shale formation, has also spurred a political fight over fracking. Initial estimates suggested that the formation could be a massive source of oil, gas, and gas liquids, particularly oil.

California has long been a major producer of conventional oil and gas, but production has declined in recent years as its most productive fields play out. The prospects of a new boom in fossil fuels from fracking energized the state’s always-energetic environmental movement to rise up in opposition to new development. Earthjustice (formerly the Sierra Club’s legal arm) said, “California, here it comes—a surge of extreme energy methods like fracking that aren’t regulated and potentially threaten the Golden State’s water, air and health.”

But that may have turned out to be a false environmental alarm, as the Energy Information Administration (EIA) and other resource agencies say now that it doesn’t look like the Monterey formation is a likely candidate for big results from fracking. The EIA in May cut its estimate of the technically recoverable oil reserves from the formation by 96%.

The problem is California’s geology. As the Los Angeles Times reported, “Unlike heavily fracked shale deposits in North Dakota and Texas, which are relatively even and layered like a cake, Monterey Shale has been folded and shattered by seismic activity, with the oil found at deeper strata.” That means it will be much more difficult to yield oil and gas from the formation by current fracking technology.

Matthews added, “Even in pro-energy Texas, the relatively small town of Denton, about 30 miles north of Dallas, has a fracking moratorium while the city considers whether to impose a permanent ban. At a recent contentious Denton city council meeting in which 500 people attended, the council moved to let voters decide in November.”

Environmental Hyperbole

The anti-fracking forces have support from many—but by no means all—environmental groups. Nationally, the Sierra Club, which has earned fame and notoriety for its “Beyond Coal” campaign, in 2012 launched a “Beyond Natural Gas” clone. The Club’s website claims, “Natural gas drillers exploit government loopholes, ignore decades-old environmental protections, and disregard the health of entire communities. ‘Fracking,’ a violent process that dislodges gas deposits from shale rock formations, is known to contaminate drinking water, pollute the air, and cause earthquakes. If drillers can’t extract natural gas without destroying landscapes and endangering the health of families, then we should not drill for natural gas.”

Not surprisingly, the Sierra Club claims are hyperbolic in the extreme and not backed by much beyond anecdotal evidence. Other national environmental groups have taken a somewhat more nuanced approach. The Natural Resources Defense Council says, “The use of hydraulic fracturing has opened up resources in many parts of the country where drilling was not previously occurring,” adding that “current laws need to be changed to catch up with the drilling explosion.”

The Environmental Defense Fund (EDF), which has worked with industry and state governments on fracking issues, takes an even more moderate stance. “Horizontal drilling and hydraulic fracturing are now standard practice for natural gas production in the United States,” says EDF. “More than half of our nation’s natural gas supply comes from wells developed using these technologies.” EDF says it is working to “minimize risks associated with developing new supplies of natural gas, while maximizing the lower carbon benefit inherent to natural gas as compared to other fossil fuels.”

A Mixed Bag

What are the real environmental impacts of fracking technology that appear to have galvanized the activist movement? Washington, D.C.–based Resources for the Future (RFF), a respected environmental think tank, last year launched a major endeavor to try to understand them. RFF asked 215 experts from all sides of the fracking debate to rank the threats of the drilling technology. The results were largely contrary to the assertions of the fractivists.

The aim of the RFF inquiry was to discern a theme in the welter of opinions about fracking among experts from industry, government, academia, and environmental groups. Despite the swirl of competing claims, always asserted with great postures of authority, says RFF, “The potential environmental risks related to shale gas development are not well understood.”

RFF said the fracking debate has been “dominated by strong and contradictory opinions. Shale gas detractors have been blamed for performing biased, inaccurate, and misleading studies. When the U.S. Environmental Protection Agency has moved to regulate or even study risks, critics have accused the agency of wanting to shut down the industry. And attempts by the Bureau of Land Management to write new regulations for drilling on federal land are derided as being so onerous and bureaucratic as to stymie all such development. Meanwhile, environmental groups eye academic supporters of shale gas development with suspicion and claim that they and some state regulators are captured by industry.”

When RFF asked its assembled experts to rank the risks—listing some 264 pathways for environmental damage—the results ran counter to the conventional wisdom. “We found a remarkable overlap for the most frequently cited risks by experts from different perspectives,” said economist Alan Krupnick, who ran the project for RFF. “In fact,” he said, “if we look at the 20 most frequently cited risks, 12 are common to all the groups. Perhaps most interesting, of the 12 consensus risks, only two are unique to fracking, while 10 relate to common practices in all natural gas and oil development, such as construction of roads, well pads, and pipelines, and the potential for leaks in well casing and cementing.”

Of the two consensus risks related directly to fracking, RFF found, both concerned surface water pollution, not groundwater contamination, a common claim of the anti-gas groups and a popular image from the 2010 anti-fracking documentary Gasland, which was a major factor in triggering the fractivist movement. RFF’s experts across the board targeted surface water effects as the most significant environmental impacts of fracking. “The results stand in sharp contrast to the rhetoric of much of the public debate,” says the RFF report.

Long-Term Shift

Are the political campaigns against fracking and natural gas likely to cut into the country’s burgeoning dash to gas? It is hard to see how that could come about, as the new oil and gas technologies have transformed the U.S. energy economy. For more than 40 years, since the days of the Arab oil embargo of the 1970s, the dominant theme of U.S. energy policy has been a search for “energy independence,” although that term has seldom been explicitly defined.

Now that debate has fundamentally changed. As the EDF writes on its website, “The shale-energy revolution does provide a new source of resilience for the U.S. and enhances America’s position in the world. The emergence of shale gas and tight oil in the U.S. demonstrates, once again, how innovation can change the balance of global economic and political power.” In 2013, the EIA reported that the U.S. has become the world’s largest producer of energy hydrocarbons, surpassing Russia and Saudi Arabia.

According to the EIA, the Marcellus Shale formation in the Middle Atlantic is “the largest producing shale gas basin in the United States, accounting for almost 40% of U.S. shale gas production.” That also makes it the largest gas-producing formation in the world. The Marcellus basin continues to increase its production, according to the EIA, from 2 Bcf/d in 2010 to over 15 Bcf/d today.

Even if a few localities around the country win the authority to stop, delay, or limit oil and gas development in their boundaries, that’s unlikely to have much impact on overall production. In the states with the greatest production from fracked oil and gas wells—Pennsylvania, Ohio, West Virginia, Texas, and North Dakota—the industry enjoys widespread support. In Pennsylvania, for example, the state’s Republican governor, Tom Corbett, joined Panda Power Funds in a groundbreaking ceremony in mid-August for an 829-MW gas-fired, combined cycle power plant in Lycoming County. The press release noted that the plant is “deliberately sited in the heart of the Marcellus Shale.”

At the same time, the Utica formation, which underlies much of Ohio and some of western Pennsylvania and sits partly below the Marcellus formation, is beginning to come into major production. According to the EIA, Utica production, at 155 MMcf/d in 2012, hit over 1 Bcf/d in September, and will continue to climb—at a rate determined by natural gas prices. Those have remained low recently based on the enormous supply of the resource. Detroit’s DTE Energy, Houston’s Spectra Energy Corp., and Enbridge Inc. in Calgary are pushing a $1 billion-plus, 250-mile gas pipeline that would connect Ohio’s Utica production to Ontario.

Regulation Redux

The best hope for environmental skeptics of fracking and natural gas is probably a regulatory approach. As part of its ongoing inquiry into fracking and its environmental consequences, RFF took a detailed look at the status of regulation of natural gas wells—largely a state government function. “As the shale gas boom has taken off,” said RFF, “states have updated their regulations, each with varying requirements. This dynamic regulatory environment has been challenging for industry, environmental groups, researchers, the federal government, and other experts to understand.”

RFF fellow Nathan Richardson, an attorney, told POWER in an interview that the degree of state regulation to date appears to be a function of the number of wells in the state. Those states with the most development tend to have the most, and most-developed, regulations. A lot of the state regulations “aren’t specific to shale gas,” he said, as states have traditionally regulated oil and gas operations inside their borders. State regulations, Richardson said, vary widely in how they approach oil-and-gas development, but that’s not necessarily a defect. After all, states differ widely in areas such as geology, geography, politics, and law. “We don’t know why states do things the way they do,” he said.

It’s worth noting as well that the U.S. is not alone in facing the issues of fracking for natural gas and oil. It has become an international issue, raising political and policy issues around the globe (see sidebar “What’s Next in Fracking Around the World?”).

What’s Next in Fracking Around the World?

Use of the U.S.-developed techniques of directional drilling and hydraulic fracturing is moving forward around the world and into new arenas. Despite heavy activist opposition, Great Britain has given a green light to fracking in large parts of the country, in part to wall itself off from dependence on Russian natural gas.

On the other hand, Germany, heavily dependent on Russian gas, has a moratorium on fracking, which could translate into a ban. France has banned the technology, which some critics have said is designed to protect the country’s heavy reliance on nuclear power.

China is likely to be another major player in shale gas. Resources for the Future noted that China has large, untapped shale resources. Still, said RFF, “The Chinese government has already experimented with a number of policies aimed at promoting shale gas development, but building an industry that can successfully utilize these reserves will be difficult.”

Russia also has shale deposits that could yield considerable amounts of gas and oil. But U.S. sanctions on the country for its takeover of Crimea and threats to Ukraine have banned the sale of U.S. oil and gas technology, including fracking know-how.

The next fracking frontier could turn out to be under the sea. As Bloomberg reported, “Energy companies are taking their controversial fracking operations from the land to the sea—to deep waters off the U.S., South American and African coasts.”

Ultimately, the force of new technologies to unlock oil and gas reserves are likely to overwhelm any local objections—or even prevent those objections from taking place, since they are unlikely to have a significant impact on the march of the technology and production. Energy guru Daniel Yergin of the consulting firm IHS wrote recently, “The biggest innovation in energy so far this century has been the development of shale gas and the associated resource known as ‘tight oil.’ Shale energy ranks at the top not only because of its abundance in the United States, but also because of its profound global impact—as events in 2014 will continue to demonstrate.”

Kennedy Maize is a POWER contributing editor.

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