Regulation and Policy Decision-making in Hydrofracking

Richard PepinoUniversity of Pennsylvania

June 8, 2011

We need Energy

• Enormous reserves of natural gas in Marcellus Shale deposits– Up to 100 years of energy (NY Times, 2/26/2011)

• Environmentally cleaner than coal• May help to slow Climate Change• Events in Japan will again slow development

of nuclear energy in US

So what’s the problem?

• Energy has many environmental problems• Coal is plentiful, but has enormous extraction

problems• Even more CAA issues when we burn coal in

older power plants• Off-shore drilling: the Gulf of Mexico vs. BP• Oil refineries have probably the worse

compliance history of any industrial sector• Nuclear plants are good, but accidents occur

Does Hydrofracking Pose Risks?

• What are main environmental concerns?– Will drinking water for private wells and local

communities be put in jeopardy?– What happens with the wastewater from operations?– Large water quantity withdrawals threatens water

supply and the ecosystem– Holding ponds are used to hold fluid mixtures that

contain a diverse mixtures of chemicals that are often released to the air with little understanding of the ecological and human health consequences

Hydraulic Fracturing Fluids

• 50,000 to 350,000 gallons per well– Benzene toluene, ethylbenzene, xylene,

napthalene, phenanthrenenes, etc.

• 75,000 to 320,000 pounds of proppant– grains of sand, ceramics and particulates to

maintain cracks to release the gas.

What are the Policy Questions?

• Federal Laws are in place, but because of primacy, state(s) have the lead in making policy decisions.

• Have federal laws been significantly weakened to allow “hydrofracking” to proceed with inadequate safeguards?

• Who pays when accidents happens?• Should we apply the Precautionary Principle?

What’s Primacy?

• Delegation of Regulatory Authority to states for Pollution Control – States have primacy over environmental policies

and programs and must meet criteria established by EPA to manage pollution control program . . .

(Encyclopedia of Public Administration & Public Policy)

– EPA practices OVERSIGHT just to make sure, but data clearly suggest NOT all delegated programs are equal in protection.• ENFORCEMENT of federal laws vs. Compliance

Assistance

Have Federal Laws been WEAKENED?

• US Congress prohibited the regulation of fracturing under the Safe Drinking Water Act (SDWA) as part of the Energy Policy Act (2005)

• National Environmental Policy Act- oil & gas operation received categorical exclusions.

• CERCLA “Superfund” exempted natural gas from the definition of hazardous waste.

• CAA exempted oil & gas industry from Maximum Achievable Control Technology (MACT) for emissions.

• Toxics Release Inventory (TRI) – Oil and gas industry exempted from reporting under Community-Right-to-Know Act (EPCRA).

Well, environmental laws can at times collide with energy policies and complicate energy policies. When the environmental statutes -- the Clean Water Act, Clean Air Act, NEPA [National Environmental Policy Act] -- are being discussed, other agencies have strong views and perspectives and want to support energy production and facilitate energy supply. The environmental laws and programs don't always trump . If the mood of the nation is to increase energy independence and energy supply, some of the environmental provisions can be viewed as constraints or barriers to that process. We've got to keep working on ways to get the two, environment and energy, to be on the same side.

Benjamin Grumbles AA for Water Policy (2002-2008)

Mr. Grumbles recently said . . .

• I didn’t feel strongly that an exemption was necessary - - that any legislation was needed. But if language was going to move through, it should have included some broader recapture provision that allowed for regulation under the SDWA if a problem developed – that the exemption would not be applicable. (ProPublica, March 2011)

Who pays for accidents?

• Did Exxon pay for the Valdez oil spill?• Did GE pay for cleaning up PCBs in Hudson

River?• Is BP going to pay for “full” restoration of the

Gulf of Mexico?

Exxon Valdez oil spill costs exceeded $7 billionAccording to the International Tanker Owners Pollution Federation Limited, “The most expensive oil spill in history is the EXXON VALDEZ (Alaska, 1989). Cleanup alone cost in the region of US $2.5 billion and total costs (including fines, penalties and claims settlements) have, at times been estimated at as much as US $7 billion.”Exxon spent billions to clean up the mess, but avoided severe punishmentAccording to CBS, “Exxon spent more than $3.8 billion in clean up costs, fines and compensation. But in 1994, an Anchorage jury found Exxon acted recklessly and awarded victims of the spill $5 billion in punitive damages. An appeals court later cut that award in half... But after nearly 15 years in appeals, the case finally reached the U.S. Supreme Court last year. The justices reduced that $2.5 billion in punitive damages to just more than $507 million.”ExxonMobil made $295 billion in profits from 2001-09 and more than $6 billion in the first quarter of 2010.

GE is a 130-year-old company with facilities all around the world. Many of those facilities began operating at a time when scientific understanding and regulatory requirements were far different from today. As we learned more about how some chemicals behave, it became apparent that there are “legacy” issues involving environmental contamination that we must address. Our most significant sites are related to our historical use of PCBs. From 1990 to 2007 GE has spent over $1 billion in addressing PCB-related issues, with the majority of those expenses (82%) coming from just three sites: the Hudson River in New York, the Housatonic River in Massachusetts and Connecticut, and a former transformer facility in Rome, Georgia.

-GE Ecoimagination

• Back in 1976, Jack Welch negotiated a settlement with the state of New York which limited GE’s responsibility for PCB pollution in the Hudson River to $3 million. Welch’s hard-nosed negotiating style gained the attention of top executives, launching his meteoric rise to the top of the company.

The Cleanup Index

• GE started dumping PCBs in the Hudson: 1947 • PCBs banned by the U.S. government: 1977• Miles of Hudson River contaminated by PCBs: 197• Miles EPA determined must be cleaned: 40 • GE has agreed to clean up: < 6 miles• Estimated cost of cleanup: $500 million• Amount that could fall to taxpayers: $350-400

million (NRDC, 2007)

"The precautionary principle or precautionary approach states that if an action or policy has a suspected risk of causing harm to the public or to the environment, in the absence of scientific consensus that the action or policy is harmful, the burden of proof that it is not harmful falls on those taking the action."

-Science & Env. Health Network on the Precautionary Principle, Jan. 1998

The Precautionary Principle

Policy & Regulatory Suggestions

• Industry?

• State?

• EPA?

The Public?Bad things happen slowly:

BoRit Asbestos Site, Ambler, PA Chester, PA