Future Energy Fellows post

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In planning my series on the environmental impacts of natural gas for The Energy Collective, I had always intended for my third post to cover the critical issue of water needs. While climate concerns may dominate for some (see my previous posts), it seems fair to say that the most contentious aspect of the shale gas revolution is related to fears over high water demands and contamination risks posed by hydraulic fracturing, i.e. “fracking”.

Unfortunately for me, Jesse Jenkins inadvertently pre-empted my article with a great recent post asking how much water is actually consumed by fracking for shale gas? (Short answer, probably not nearly as much as you think.) While I don't wish to reproduce Jesse's article verbatim, I think a recapitulation of his main points is in order:

  • The U.S. fracking industry was responsible for around 0.3 percent of the country's total freshwater consumption in 2011. Even in arid regions like Texas, this figure is probably not much larger than one percent.
  • A coal-to-gas reversion in the electricity sector would likely lead to substantial drop in the water demands of power generation. This is primarily due to the fact that gas-fired power plants are more thermally efficient than their coal counterparts and thus require much less cooling water. The same is true for nuclear power. [*]
  • There are caveats, however, since the focus on aggregates does mask some important conflicts at the ground level. (E.g. In cases where farmers come up against the competing water demands from a large gas development in their county.) This makes water an inherently local issue.

The final sentence above strikes me as a good departure point for the additional context that I can provide to Jesse's article. I am therefore going to concentrate on two intertwined issues, namely water pollution risks and property rights. 

Water pollution risks: So far, so good (mostly) 

There will be no shortage of information awaiting anyone that wants to form an opinion on shale gas and whether it poses a risk to freshwater resources. However, much of the debate is characterised by little more than heated rhetoric with frequent disregard for any meaningful supporting evidence. What, then, does the (peer-reviewed) scientific literature actually say about the risks of water pollution due to fracking activity?

It be should stated upfront that this is something of a nascent field and research continues apace. However, the available evidence so far appears to paint a fairly positive picture for fracking proponents. Thus, one of the first studies to systematically investigate the water contamination risks posed by the shale gas industry was presented by Osborn et al. (2011). Despite being published in the prestigious U.S. Proceedings of the National Academy of Sciences (PNAS), this paper still managed to inspire some amusingly contradictory headlines.[**] Nevertheless, by comparing neighbouring sites, the authors observed that gas leaks in shale formations were most likely the result of natural processes rather than human activity. They further concluded that there was probably no correlation between gas drilling and chemical contamination of shallow groundwater systems. (From the abstract: “We found no evidence for contamination of drinking-water samples with deep saline brines or fracturing fluids.“) Osborn and his co-authors did, however, note the presence of abnormally high methane levels near some drilling sites. Nevertheless, the uncertainty surrounding its origins – e.g. whether thermogenic or biogenic – led them to conclude that more research was needed in order to draw definitive conclusions: “More research is needed across this and other regions to determine the mechanism(s) controlling the higher methane concentrations we observed.” (p. 4)

PNAS then published an intriguing paper by Olmstead et al. (2013) last month, which investigates instances of surface water pollution due to shale gas developments. (A press release of the paper can be found here.) To summarize, despite examining over a decade's worth of data from across a wide geographic area, the authors were unable to find any statistical evidence of water contamination due to leaks at the actual well sites (i.e. drilling locations). They did find some evidence of pollution downstream from wastewater treatment facilities in the form of raised chlorine levels. This suggests that improved handling of wastewater could effectively eliminate the observed problems of water contamination due to shale activity. Moreover, the authors are clear to point out that such developments have already been ongoing in Pennsylvania (the region under examination) for some time.

In general, the available scientific literature appears to support a cautiously optimistic view of the dangers posed by fracking to our freshwater supplies. Definitive evidence may yet come in the form of a wide-ranging study by the U.S. Environmental Protection Agency (EPA). The completed results of this project will only be made available in 2014 and the EPA is remaining rather tight-lipped about any preliminary findings thus far.[***] However, alongside the above studies, I would imagine that their failure to raise any red flags up to now bodes well for the shale industry. 

Property rights, liability and contingency plans 

A robust discussion of the economic application of property rights to water resources would take up far too much space in what is already becoming a lengthy post. I will merely say that water has long been treated as a rather unique good in comparison to other natural resources – often to the chagrin of economists. Indeed, the chronic underpricing of water in numerous parts of the world has regularly resulted in unchecked profligacy and unsustainable usage. (For those interested, Sheila Olmstead, lead author of the aforementioned PNAS study, has a good review of the economics of scarce water resources here.) However, it is perfectly obvious that property rights matter. This applies to both water and gas reserves, so that different regimes might have notably different implications for the various stakeholders. For example, whereas underground resources in the U.S. belong to the individual landowners, in my home country of South Africa those rights are claimed by the state. This has added a layer of complexity to the already acrimonious debates surrounding the substantial gas reserves (485 Tcf) that are believed to lie under an environmental sensitive, semi-desert area known as the Karoo.

Abstracting from the specific complications of varying property rights regimes, my personal preference would be that producers face full liability costs in the event of (preventable, negligent) accidents. If I were a resident in an area under shale development, I would also want to ensure that compensation agreements are underscored by contingency plans in the event of contamination. This presumes the presence of a clear regulatory framework that not only codifies what qualifies as “negligent” behaviour (for example), but also extends to the appropriate protection of outside parties that stand to be affected by the agreements between, say, a gas producer and local landowners. In fact, I would think that the extreme difficulty of prior contracting between all potential stakeholders pretty much makes the provision of overarching environmental legislation an absolute necessity. (As opposed to pure contract or tort law agreements between individual agents.) On this score and to the best of my knowledge, it should be said that the U.S. appears to be largely headed in the right direction and other countries would be well advised to follow its lead.

Conclusion [with slight edits based on the comments]

It would be strangely naive to suggest that there are no potential risks to our water resources due to fracking activity. Like all energy sources, there are trade-offs to securing the benefits of shale gas and the possibility of water contamination is one of those. However, anti-fracking advocacy groups do their credibility few favours through the selective interpretation of – or pure disregard for – the existing scientific evidence, and what this actually says about the extent of these risks. Several comprehensive studies have thus far failed to establish any systematic relationship between drilling activity and water pollution. Important research is ongoing, but we clearly have reason to be optimistic at this stage. Regardless of the final outcome, I believe that such matters should be handled according to a clear regulatory framework that incorporates full liability and assures other stakeholders of the requisite contingency plans should an accident occur. After all, effective risk management is an entirely different animal to prior restraint.

Image: Abandoned Oil Rig via Shutterstock

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[*] Subsequent to Jesse's post, a new study by Laurenzi and Jersey (2013) has effectively come to the same conclusion. I should perhaps also point out that I have a forthcoming paper on the (substantial) water demands of thermal-based power plants, which also investigates the associated impact on electricity prices.

[**] Compare the headlines of these two articles, for instance. That they are ostensibly written about the same study gives you an idea of how absurdly polarised this debate has become at times. More on partisan interpretations of the Osborn et al. (ibid) paper here and here.

[***] From the executive summary of the most recent progress report (12/2012): “At this time, the EPA has not made any judgment about the extent of exposure to these chemicals when used in hydraulic fracturing fluids or found in hydraulic fracturing wastewater, or their potential impacts on drinking water resources.” (p. 3)