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Hydrofracking Politics and Sustainability Management

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If the abundant natural gas available as a bridge fuel on the road to renewable energy is to actually be utilized, Americans will need to believe that the gas being extracted does not damage the environment. The natural gas that we hope to mine will probably last for less than a hundred years. The ecosystems that sustain our food and water systems will need to last for thousands of years. In a disappointing move last week the federal government took us one step forward and two steps back on the hydrofracking issue. The step forward was the federal government's decision that companies engaged in hydrofracking on public lands would be required to disclose the chemical composition of their fracking fluids. The two steps back took place when the Department of the Interior caved in to industry pressure, and changed the proposed rule from requiring disclosure before fracking begins to requiring it after it is completed. It seems that the urgency of getting the gas out of the ground dominated any concerns about potential damage from fracking chemicals.

According to Mathew Daley of the Associated Press:

"The new rules, which have been under consideration for a year and a half, were softened after industry groups expressed strong concerns about an initial proposal leaked earlier this year. The proposal would allow companies to file disclosure reports after drilling operations are completed, rather than before they begin, as initially proposed. Industry groups said the earlier proposal could have caused lengthy delays."

If these gas drillers are worried about delay that results from filling out a few forms for the Department of the Interior, wait until they experience the delays that follow visible damage to a valuable source of groundwater. Lawsuits, demonstrations, teach-ins and a full activist onslaught will make these folks wish they had an effective and respected regulatory system to fall back on. Unfortunately, in this era of free market extremism, any steps taken to ensure safety and care of the environment are seen as a waste of time.

The BP spill in the Gulf of Mexico ought to be a cautionary tale to these fracking fanatics. They should think about the drilling delays that followed that example of lax regulation. It is obvious to me that we need to increase our ability to generate energy to support the high throughput economy required throughout the world. If we are to manage the planet's resources sustainably we need to exploit those resources with great care. Speed is less important than the development of a predictable and safe supply of energy. That requires information about the impact that fossil fuel extraction has on the planet's ecosystems. When the impact is too great, the action causing it must be modified and sometimes stopped. If we stop the action before we damage the ecosystem the long term impact and its clean-up cost will be lower than if we stop it after the damage has been done. Knowing the chemicals used in hydrofracking after the fracking is over can facilitate the environmental clean-up; but knowing the chemicals ahead of time opens up the possibility of preventing the damage in the first place.

Sustainability management requires that we get more sophisticated about the way we manage the planet and its resources. A more sophisticated and competent approach to management requires information, scientific analysis and the exercise of great care before we mine the planet's resources. A policy of fast and furious "drill baby drill" may generate some quick bucks, but will lead to mistakes, environmental damage and "not in my back yard" anti-development politics. A more careful approach will cut into short run profits, but still leaves plenty of cash on the table.

Daley reported that:

"The industry also has complained that disclosure of chemicals used in fracking could violate trade secrets, although Salazar said the rule would include exemptions for specific formulas. Some of the chemicals used in fracking include benzene, toluene, ethylbenzene and xylene, all of which can cause health problems in significant doses."

The Yiddish word for the trade secret argument is "chutzpah," which the online dictionary defines as "shameless audacity." Let me see if I understand this: You own or lease the land which contains the gas, you've built the well and installed the technology to extract the gas, and the competitive advantage and profit comes from the chemical composition of the liquid you inject to release the gas? This is the "secret sauce" of hydrofracking? Unbelievable.

The idea that rules governing the development of scarce resources are anti-business is complete idiocy. Zoning the land in Manhattan has not destroyed the real estate business around here. Placing traffic lights on busy corners has not eliminated the sale of automobiles. Creating rules of the game can engender the certainty and stability needed to encourage investment and stimulate competition.

The industry reaction against the Obama administration's rule proposing chemical disclosure prior to fracking was disheartening. The administration's inability to resist the pressure against the rule is scary. Opponents of regulation clearly have the upper hand in the midst of this Presidential election. Those of us hoping for effective regulation of fossil fuel extraction get to choose between the anti-regulatory zeal of Romney's supporters and the tepid, half measures of the Obama administration's Department of the Interior.

While the federal government is caving, state and local governments are less predictable. Writing on the new fracking rule in the New York Times, John Broder observed that: "A majority of the 13,000 wells drilled each year by fracking are on private lands and thus fall primarily under state regulation, as they have for 60 years." The wells that are not on federal lands are subject to state rules, which vary greatly from state to state. New York State is still studying its approach to the regulation of hydraulic fracturing. The move against federal rules on federal lands makes it unlikely that we will see national standards creating a uniform approach throughout the United States. This means we will have the opportunity to learn from a wide variety of approaches. It also means that it is almost inevitable that some mistakes will be made and some environmental damage will take place.

Last week Thomas E. Mann and Norman J. Ornstein in the Washington Post and Paul Krugman in the New York Times wrote about the polarization of American politics and the conservative slant of the Republican party. Krugman thinks it is due to income inequality and Mann and Ornstein blame it on the dynamics of political competition. Whatever the cause, my concern is that this extreme ideology makes it more difficult for the federal government to promulgate new or updated environmental rules. Since the new political reality is that all regulation is bad, it is politically prudent to leave old rules in place, even if new technology and new business practices make those rules ineffective or inappropriate.

We need an agile, flexible and intelligent approach to regulation. Political ideology and political calculation make our rules more rigid and ineffective. There is a more pragmatic practical approach to regulation that sits somewhere between strait-jacket totalitarianism and the Wild West. We need to find that approach or the planet we rely on for food, air, water and energy will no longer be capable of providing us with those services. We need to manage, not destroy, the planet's resources. Finite resources such as fossil fuels must be mined and utilized with care. In the long run, a planet of ten billion people will need to build its economy on renewable resources. That high-tech green economy requires technology we do not yet have, and management capacity we must learn to develop. The nations that learn how to build partnerships between industry, government and universities will have the best chance of leading this new global economy. The ideological warfare in Washington makes it more difficult for America to assume that leadership role.

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