And what about more immediate environmental concerns? The most common objection to fracking is not the false promises discussed above but its impact on the world we live in. In John Mauldin’s piece, he said that, according to “true experts, properly done, horizontal drilling and fracking pose no danger to the environment.” (Of course, “properly done,” there would be no automobile accidents or outbreaks of food poisoning, either.) Here are a few legitimate concerns that have been raised about fracking’s environmental effects:
- Fracking uses millions of gallons of water per well, most of which is unusable thereafter. There is competition for water rights between oil companies on one hand and farmers and ranchers on the other. Last summer Pennsylvania suspended fracking for a while, due to low stream flows.
- The mix of chemicals used in fracking is treated as proprietary, is not subject to much regulation, and therefore is not tested for environmental safety before use. Not surprisingly, when leakages and spills have occurred, they have harmed people and farm animals.
- Possible pollution of drinking water is a matter of considerable debate. Although fracking is normally done well below the water table, there are natural fissures in the rock that can allow chemicals to migrate. The disposal of used fracking water is another major source of concern, although some operators are experimenting with ways to recycle and reuse the fracking water.
- Earthquakes in areas that don’t commonly have them, including Ohio and Oklahoma, have been linked to fracking activities nearby.
- The shale production process requires thousands of wells, and each well requires dozens of heavy truck trips to carry the drilling equipment, pipe, and water and chemicals to the well site, often over rural roads not built for such intense traffic. In many cases it is not clear whose responsibility it is to pay for the road damage.
- The impact on a community of a blizzard of drilling activity is very disruptive, and recovery when the oil folks leave town in a year or three may be quite difficult. When it requires $15 per hour to get people to work in a fast food restaurant, as Mauldin describes in his story, people living on fixed incomes or not participating in the drilling boom will be adversely affected.
- In contrast to long-lived conventional wells, as I noted above, shale wells will likely have a short productive life. Who will be responsible for the long-term monitoring of the spent wells? The record of other extractive industries does not give cause for much optimism.
Creating a happier solution
Rex Tillerson, CEO of ExxonMobil, recently told the Wall Street Journal that our American system of private ownership of mineral rights, the fact that we have independent drilling companies, and our mature system of refined rules and experienced industry personnel “ensures that all natural resources are fully developed” in this country. Whatever the concerns, in other words, it is likely that extraction of oil and gas from shale deposits will continue. It is also likely that it will not turn out to be the “happy solution” that Mauldin and others want to see.
This boom (or is it a bubble?) creates a unique opportunity. The burst of new oil and gas is like winning a lottery. As most financial advisors know, sudden wealth can only enable long-term security if serious planning is involved at the outset. That’s what we should be doing now.
We need a new energy system, both because climate impacts are growing and fuel supplies are limited. Building it out will require a lot of capital and extensive labor – all fueled by a lot of energy – before the new electricity starts to flow. Rather than seeing how fast we can use up our bounty with cheaper electricity, business as usual, and disregard for the consequences, we should invest this one-time abundance to promote long-term low-carbon prosperity. If we do, once prices are back up and production has dropped back to normal levels we will have something to base an economy on. If we don’t, we’ll just end up with a shale oil and gas hangover and nothing to show for our binge.
Richard Vodra, J.D., CFP®, is the President of Worldview Two Planning of McLean, VA. He recently retired from a 27-year career as a personal financial planner. He is a member of the Board of the Association for the Study of Peak Oil (ASPO-USA). He can be reached at firstname.lastname@example.org.