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Keith Schaefer writes on oil and natural gas markets in a simple, easy to read manner. His new newsletter will outline which TSX-listed energy companies have the ability to grow, and bring shareholders prosperity even in these tough times. He has a degree in journalism and has worked for several... More
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  • The Stakes Get Higher In The Fracking Debate 3 comments
    Sep 18, 2012 2:11 PM

    Is there any common ground in the debate over hydraulic fracturing? It's a divisive issue, especially in the U.S., where 90%-plus of all global fracking is done now, pitting neighbor against neighbor.

    Two weeks ago I wrote about a success story - How a U.S. Oil Refinery Got Saved - in which different stakeholders were able to put aside differences and create a win-win scenario for everyone.

    Can the groups on either side of the fracking debate do the same?

    The stakes are higher, as the main concern of those against fracking is that it may contaminate drinking water. That may or may not be true, but it certainly validates the fierce emotion behind the issue.

    Media reports surfaced in late August that New York State Governor Andrew Cuomo may end the ban on fracking the state has had since 2008. Trouble started immediately.

    The Albany Times-Union reports that roughly 1,200 people attended a march through the state's capital on Monday, August 27, calling on Cuomo to uphold the fracking ban.

    "Hydrofracking remains a divisive issue for New Yorkers and presents DEC (Department of Environmental Conservation) and the Governor with a political 'lose-lose,'" Steven Greenberg, a pollster at Siena, said. "Whatever decision they make is going to upset as many people as it pleases."

    A recent survey from Siena Research Institute found more New Yorkers supported restarting fracking than opposed it… by a razor-thin margin of 39 percent to 38 percent.

    Still, the DEC's research notes that the industry could bring more than 17,600 jobs to the state, and potentially as much as $125 million each year in tax revenue, making a strong counter-argument all on its own.

    For many, the issue is jobs and royalties vs. the environment. I don't see it that way, though. This multi-billion dollar industry-horizontal drilling and multi-stage fracking-has been around for 15 years, but really only seen major growth since 2007-five short years ago.

    And as companies test new fracking technology-plug & perf vs. open hole, slickwater vs. oil vs. propane-new things get developed that keep lowering costs and increasing the amount of oil and gas that can get produced. What I mean to say is that technology is changing so fast, the industry can hardly keep up-much less the general public. And the industry is obviously fixated on keeping up with the competition; not explaining things to the public-which, in all likelihood, will all be out of date shortly.

    The industry is even developing more environmental ways of fracking. I believe, for example, that in five years all fracking fluid will be food-grade. You (ok, maybe not you, but the oil and gas company reps) will be able to drink the stuff. The public is demanding it. I think it will happen-but not right away.

    The industry and the public are going to continue to dance around this issue for the next couple years trying to find consensus. The Shale Revolution is SO important economically to the United States there is no way fracking is EVER going to get banned in the near-to-mid-term. But both sides need to work harder to find consensus.

    The two sides don't talk the same language yet. When regulators produce 450-page studies which have scientific backing that say fracking can be done safely, I don't hear respect from the people opposed to fracking.

    And the industry… well, a lot of them are like deer caught in the headlights. They've been fracking for 50 years, and they just can't get over what all this new fuss is about.

    Get over it, guys. And hurry.

    There is a very bright light of mainstream attention that will forever change the way oil and gas does its business in the developed world, and how it gets permitted.

    Sadly, the industry hasn't been pro-active or successful in getting ahead of public opinion on fracking, and they remain re-active in responding to issues-most of which they clearly never thought were issues in the first place.

    And some very aggressive operators who have little bedside manner haven't helped at local levels-especially in areas that are new to oil and gas, like the northeast US.

    Carol French and Carolyn Knapp, two Pennsylvania dairy farmers, are outspoken critics of fracking. They not only point to stories of contaminated wells but to the problems that come with the infrastructure brought in by operators. According to The Associated Press, the pair say that pipelines can cut off access to crops and drilling equipment can cause serious damage to roads.

    "I never in my wildest dreams envisioned the industrialization that comes along with this process," Knapp told a group in North Carolina.

    Siobhan Griffin, a New York cattle farmer, told the news source that she fears for her animals if fracking comes to town.

    Two incidents stick out in her mind: the quarantine of 28 cows in Pennsylvania after they drank fracking wastewater and the death of 17 Louisiana cows that died after drinking water that was contaminated. (Fracking involves millions of gallons of water mixed with sand and about 1% chemicals pumped into the earth to fracture shale rock, releasing gas. The wastewater created by this has caused many fears of drinking water contamination.)

    Not all farmers have the same view of fracking, however. Some see the wealth it has brought their neighbors, and are anxious to get in on the action.

    New York dairy farmer Jennifer Huntington took her town to court after it stopped a well plan on her land. She says that the money brought in by the operation would have paid for a number of updates to her farm.

    "We would have used the royalties to update the anaerobic digester that we installed in 1984," she told the AP. "We would have purchased a better oil seed press to more efficiently press soybeans for biodiesel. We would have invested in our farm, our land and our employees."

    Dan Fitzsimmons, the chief of the 70,000-member Joint Landowners Coalition of New York, has worked to have the Empire State lift its moratorium on fracking so he and others could profit from it like their neighbors in Pennsylvania.

    "I go over the border and see people planting orchards, buying tractors, putting money back in their land," he said. "We'd like to do that, too, but instead we struggle to pay the taxes and to hang onto our farms."

    The picture is not always clear even once fracking starts up, however. While some of the environmental impacts of fracking may often get overstated, and are often misunderstood, some incidents have highlighted the potential for problems just in bringing the gas industry into populated areas.

    The Philadelphia Inquirer notes that the town of Dimock, Pennsylvania-made famous by a shot of flaming tap water from the slightly histrionic documentary Gasland-remains deeply divided by the presence of the gas industry.

    The town was at one point the epicenter of the hydraulic fracturing debate after initial reports suggested that fracking had tainted nearby wells. The story really kicked off when methane that had collected in one well exploded, ignited by the well's electric pump.

    Investigation from the U.S. Environmental Protection Agency eventually found that the problem was actually with the cement used to seal off the wells, which let gas migrate into the local aquifers. Still, even with extensive efforts to fix the wells and clean the water, many residents remain opposed to further drilling and distrustful of the companies doing the work.

    "You sort of have to give them the opportunity to fix your water. It's all about the water; it's not about the money," Bill Ely, a 61-year-old resident of Dimock, told the Inquirer. However, he added, "Once your water is bad, it's hard to get back to drinking it."

    Even in areas where the environmental impacts have been less dramatic, there has been notable disagreement.

    The Star-Gazette notes the example of Montana's Blackfeet Indian Reservation, which leased about two-thirds of its land for oil and gas exploration in 2008.

    The reservation has already brought in around $30 million; enough to pay off debts incurred building a casino, upgrade some of the area's infrastructure and offer some regular income for residents, without any dramatic environmental problems.

    However, the land has started to fill up with all the trappings of the oil and gas industry, from drilling rigs to water and chemical containers, leading many to question the decision.

    So the debate rages. The emotional side needs to look at the science, and the engineers need to understand the emotion, which doesn't get papered over with a study. I would suggest it's up to industry to make the big first move-whatever that is. But for it to be effective, it needs to be a Big Leap Forward.

    - Keith

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (3)
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  • jjmc2001
    , contributor
    Comments (1358) | Send Message
    At various times during my career I have been in the energy industry and for most of my adult life I have owned farmland. Currently I have a farm that has 3 pipelines under it. Two transport crude oil and one is for Nat Gas. We also have had oil drilling activity on and adjacent to our land. The only problems we have had were with the initial construction of the Keystone Pipeline(the first one) as TransCanada was totally inept at managing the process. After a rocky start they did just fine. In summary we have had ZERO long term problems with any of this activity and it has been a terrific financial boost during some lean farming years. The people who whine about it or either not experienced or have a bias against energy development and use this as a platform for their views. I am aware that accidents happen and sometimes plants and animals can be harmed but these are minor issues. We were compensated for the interruption to our farming activity and now are harvesting crops with no ill effects.
    18 Sep 2012, 03:03 PM Reply Like
  • Global Warming Examiner
    , contributor
    Comments (98) | Send Message
    Fracking usually brings up brine (salty water). In some states they dry it and sell the salt to the state to put on roads. This is not considered pollution even though the salt is released into the environment and can easily contaminate the water. If the same brine were ever released from a frac job, then it would be an environment disaster of un-measurable proportions.
    18 Sep 2012, 03:51 PM Reply Like
  • Mrkus
    , contributor
    Comments (38) | Send Message
    Not to mention radioactive as well. 5 years of hydrofracturing is but a second in geologic time. There are many things we do not understand about how this affects underground (earthquakes being a significant one).
    4 Mar 2013, 09:28 PM Reply Like
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