Conflict over Hydraulic Fracturing: Politics vs. Policy

The policy debate over hydraulic fracturing (or “fracking”) in the northeastern states of the Marcellus Shale has generated much more heat than light.  It is the mirror image of the climate change debate, during which opponents of climate change turned a blind eye to climate science and the empirical evidence supporting the notion that human activity is driving global warming.  Now, opponents of fracking are turning a blind eye to the opportunity costs (that is, the relative environmental and health risks) of limiting shale gas production in the United States.

The Controversy

Fracking involves the injection of water, sand and chemicals deep into shale formations to fracture rock, thereby freeing formerly inaccessible natural gas.  It has transformed American energy markets, creating an ample domestic supply of gas and driving domestic natural gas prices to record lows. Some people support shale gas production in their communities, because it brings economic benefits (royalty payments to landowners, jobs, local taxes, etc.).   At the same time, fracking has generated intense local opposition in some places, particularly in the northeastern United States, where critics worry about the impacts of fracking on drinking water and air quality, among other things.  That opposition, in turn, has split local communities and provoked litigation and conflict over proposed bans and regulatory standards at the state and federal level.

Contrary to reports in or in popular media (such as the movie GasLand), the scientific literature on fracking does not support the notion that the process of fracturing shale formations causes groundwater contamination; nor is there any scientific support for allegations that air pollution from fracking operations causes cancer. Rather, the risks associated with fracking are like those associated with a variety of other commonly-accepted (but regulated) industrial activities.

Which is not to say that those risks are insignificant. It is rare but not unheard of for drillers to spill fracking fluids on the surface or fail to properly construct wells in ways that cause groundwater contamination.  This is essentially a compliance problem. Furthermore, compliance issues aside, when a well is being drilled and “fracked,” the production area is a hive of truck traffic, power generators, and other activities that can transform a quiet rural or suburban landscape into an industrial area. Thus, it is entirely logical for some people to to oppose fracking in their backyards.  Most of these impacts of fracking are temporary, but it is little wonder some people don’t want to endure them.

It is at this point, however, that the case against fracking goes off the rails.  In their efforts to keep fracking out of their backyards, opponents of the practice have sought to convince policymakers to impose statewide or nationwide bans on fracking.  The states of New York and Vermont, as well as the countries of France and South Africa have imposed such bans.  What is missing from these policy conflicts is any sense of the relative health, safety and environmental risks posed by fracking, and the opportunity costs of discouraging shale gas production.

The Missing Piece

While natural gas is used directly by end users (by industry as a feedstock and by commercial and residential consumers as a heating fuel), one of its primary uses in the American economy is as a fuel source for electricity generation.  While gas-fired electric generation capacity has been growing, coal-fired power plants have always comprised the dominant part of the American electric generation mix — that is, until the shale gas revolution of the last five years.

Because coal-fired power is, relatively speaking, dirtier and deadlier than other electricity sources, regulators and environmentalists have tried for years to reduce emissions from coal-fired power plants.  Indeed, the so-called “EPA war on coal” that features in Republican campaign ads in this election season is really the culmination of decades of litigation and halting, tentative efforts to regulate the long understood environmental and health risks associated with coal combustion.

Now, market forces are doing what regulation and lawsuits could not – closing down coal-fired power plants in significant numbers.  Historically, coal-fired electricity generation has dwarfed generation from gas-fired plants.  But look at the trend over the last decade:

U.S. Electricity Generation from Coal-fired and Gas-fired Plants

Data Source:  Energy Information Administration

Coal

Natural Gas

Ratio, coal to gas

2002

1,933,130

691,006

2.8

2003

1,973,737

649,908

3.0

2004

1,978,301

710,100

2.8

2005

2,012,873

760,960

2.6

2006

1,990,511

816,441

2.4

2007

2,016,456

896,590

2.2

2008

1,985,801

882,981

2.2

2009

1,755,904

920,979

1.9

2010

1,847,290

987,697

1.8

2011

1,733,430

1,013,689

1.7

2012*

1,006,627

866,552

1.2

* year to date

In April of this year, that for the first time ever, gas-fired plants generated more electricity than coal-fired plants. The EIA projects much faster growth in gas-fired capacity than coal-fired capacity in the coming years, primarily because of natural gas prices are expected to remain relatively low.

The environmental and health benefits of this transition — and the environmental and health costs of the slowing or foregoing it – are likely to be enormous.  Natural gas combustion yields half the greenhouse gases (and much smaller fractions of the other pollutants) that we get from coal combustion on a per-btu basis.  A February 2011 study by health professionals published in the Annals of the New York Academy of Sciences concluded that our reliance on coal for energy causes tens of thousands of premature deaths per year, far more than any other energy source. An August 2011 analysis published in the American Economic Review offered further support for the notion that substituting natural gas for coal in the electric generation mix will yield enormous health and environmental benefits.

To be sure, we are still learning about the full environmental impacts of fracking, but there is no real support in the growing scientific literature on fracking for the notion that fracking poses greater pollution or health risks than our reliance on coal for energy, nor does it pose greater risks than those we regularly accept in connection with existing forms of natural gas production.  Indeed, the risks of fracking seem comparable to a variety of industrial activities that Americans have long regulated and tolerated.

The Mismatch

So why the disconnect between the fracking policy debate and our understanding of the relative risks of fracking compared to other forms of electricity generation?  As is often the case in energy policy, the problem is the mismatch between the distribution of the costs and benefits of fracking, on the one hand, and the distribution of political influence (votes), on the other.

In the debate over climate change policy, those who will bear the costs of limiting greenhouse gas emissions (representatives and customers of the energy industry) are much better represented in the American policymaking process than those who will benefit from greenhouse gas emissions limits (future generations of Americans and residents of foreign countries who are particularly vulnerable to future harms associated with climate change).  The same is true in the fracking policy debate.

Just as many of those who will be harmed by coal’s greenhouse gas emissions have no voice in the policy process, those unlucky enough to be killed by inhaling fine particles, mercury, or other byproducts of coal combustion cannot identify their killer.  By contrast, those who must endure the nuisance and other risks associated with fracking know exactly where to point the finger of blame.  Consequently, they exert pressure on policymakers, skewing policy toward the regulation of fracking even at the cost of more (and far more harmful) emissions from coal-fired electricity generation.

This is a common phenomenon in the world of energy policy.  It is perfectly logical for me to oppose the siting of high-voltage transmission lines across my property, or for the residents of Martha’s Vineyard to oppose construction of the Cape Wind project off their shores. Nevertheless, both the transmission line and the wind farm may well provide positive net benefits for society as a whole.

These are the kind of land-use conflicts that play out daily in the American policy process.  Local, state and federal regulators must resolve these conflicts by weighing the costs and benefits of alternative courses of action. Presumably, in making these decisions, policymakers should consider the interests of the under-represented.

In the debate over fracturing, it makes no sense for state or federal governments to ban fracking, given the opportunity costs of doing so, and environmental and other benefits it promises.

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