THE BLOG
01/11/2013 10:18 am ET Updated Mar 13, 2013

'Frackers' pull a fast one?

By Alexandra Duszak

When Pennsylvanians agreed to a massive increase in natural gas drilling in the state, they were told that the economic benefit would outweigh any potential risk to the environment.

The drilling employs a controversial technology known as hydraulic fracturing, or fracking, that backers say will help the nation become energy independent and provide jobs and lower heating costs for Pennsylvanians.

But with gas prices collapsing thanks to an unforeseen glut, energy companies are pushing for permission to export the commodity to countries such as Japan and South Korea. Exports will lead to more drilling, more damage to roads and the environment, and higher, rather than lower, gas prices, say critics.

Pennsylvanians are "surprised, stunned, angry and upset" about the export push, said Delaware Riverkeeper Maya van Rossum. "And that's whether or not they're supportive of fracking."

Some history

Fracking involves injecting millions of gallons of water, sand and toxic chemicals into holes drilled into underground shale deposits.

The technology, which became popular in Pennsylvania around 2008, enabled drilling companies to access enormous, previously unreachable supplies of natural gas -- and brought hope to a state long-mired in a recession.

Despite its economic potential, fracking has a dubious environmental record. Exempt from the Clean Water Act, the Safe Drinking Water Act and the Clean Air Act, it has been blamed for contaminating residential wells and sparking explosions.

Drilling rigs don't make great neighbors, either. The fracking process -- which requires trucking in billions of gallons of water -- is unsightly and tough on roads.  But those concerns took a backseat to drilling in Pennsylvania, where a pro-fracking governor, Republican Tom Corbett, was elected in 2010.

Natural gas production in the U.S. has been so prolific that the price of gas has fallen to approximately $2.50 per million British thermal units from a previous high of about $15.

Low prices were great for consumers, who were able to heat their homes at record-low cost, but not so great for natural gas producers, whose profits and stock prices spiraled downward.

Shares of Chesapeake Energy, for example, the No. 1 producer in Pennsylvania and No. 2 nationwide, reached nearly $70 in 2008 but are now trading around $17.

New markets, more profits

Gas companies are now seeking authorization from the Department of Energy to export the gas overseas, where demand is higher.

They already have permission to export the gas to the nation's free trade partners, which are not major potential customers. Many are obtaining permits to build the massive facilities that convert the gas to liquid by chilling it to minus 260 degrees Fahrenheit, which allows it to be shipped overseas.

To realize big profits, they need permission to export to non-free trade agreement countries such as South Korea, India, China and Japan, where the price of natural gas has reached more than $18 per million British thermal units.

Requests from 16 gas producers to export to such countries are currently in limbo. Approval may hinge on the conclusions published last month in an Energy Department report on exports. The status of the permits will remain undecided until the closing of a public comment period and additional department analysis.

If the agency approves the permits, natural gas companies would be allowed to export upward of 21 billion cubic feet of liquefied natural gas (LNG) per day -- more than one-quarter of current U.S. consumption.

The report claims that although such large-scale exports would cause a slow rise in domestic prices, they would benefit the nation's economy overall by improving the balance of trade, encouraging foreign investment in the U.S. and creating more income for natural gas producers.

But the macroeconomic benefits of exports don't mean much to those who have to deal with gas rigs, potholed roads and contaminated water supplies.

"If you think, 'That's where we are today and the markets couldn't be more deflated,' what happens if the markets open up and the industry is allowed to go hog wild?" asked David Masur, executive director of the Pennsylvania-based environmental advocacy group PennEnvironment.

Masur estimates that approximately 6,000 wells have been drilled in Pennsylvania so far, and said that as many as 50,000 wells could be drilled as the industry grows.

"I think we will continue to see many of the effects we're seeing now, many-fold over," he said.

One town's story

In the beginning, fracking brought a much-needed economic boost to Dimock, Pa.

"There were preachers in church saying this was God's work, this is a gift from heaven," said Victoria Switzer, a retired teacher who lives in Dimock.

But the town's water became so contaminated with methane gas that a private well exploded. Water taps became potential flamethrowers. Fifteen families in the town filed a lawsuit against Cabot Oil & Gas, alleging the company's drilling practices had contaminated their water supply.

Cabot was barred from drilling in the Dimock area, fined $120,000 and ordered to deliver water to the residents. That hasn't stopped other drillers.

Switzer, who was one of the plaintiffs in the lawsuit, said the sky is lit up at night by natural gas flares. Roaring natural gas compressors make sleeping difficult. And these problems continue for days, sometimes weeks, on end, she continued.

Continue this story and read more investigations at The Center for Public Integrity

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