Response to “Fracking Can Be Worth Billions”, Business Times 26/11/11

Below is a copy of Jolynn Minnaar’s response to the Prince Albert Friend with regards to its recent reprinting of “Fracking Can Be Worth Billions“, by Tshepo Mashego, originally featured in the Business Times on 26 November 2011.

 

While the scope of this column does not allow for a full response to “Fracking Can Be Worth Billions”, printed on pg. 41 of the Prince Albert Friend, Nov/Dec 2011, I hope to summarise some issues that the piece, like many others on the topic in the South African media, has overlooked. Although I am focussing on the statements made by Dr Danie Vermeulen, it is worrying to note that, more than a year after ‘fracking’ entered local discourse, most articles in the press continue to fail in providing new, researched information on the matter of unconventional gas drilling.

Firstly, let it be clear that worldwide concerns around shale gas production are far from limited to “environmental drawbacks.” While substantial air pollution, possible water contamination, impacts to human and animal health, vast surface invasion and social disruption are certainly pressing issues in their own right, the debate on ‘fracking’ in South Africa should develop from a mudslinging between environmentalists and economists. It is here, in the middle ground of this polarised dispute, where many of the real troubling questions start to surface.

When considering the possible economic benefits of hydraulic fracturing, more attention should be paid to the significant externalities surrounding natural gas extraction.  For instance, to host the 4000 truck trips required for each well, the state of New York estimates that road maintenance alone will cost communities up to $375 million. In 2000, the mayor of Rifle, Colorado, announced that, $68 million worth of infrastructure would be required within five years to host the increase in the city’s population with the arrival of the extractive industry and many out-of-state gas workers.  Recently, owing to water contamination in a gas drilling area, the Environmental Protection Agency has had to step in and provide clean water to residents in Dimock, Pennsylvania, where up to 60 households may need regular provisions over an indefinite time period. Viability studies need to start recognizing that the majority of these costs fall upon the taxpayer.

Outside of the external costs related to the impacts of gas production, this article fails to take into account substantial studies and reports about the other side of the economic coin: the repercussions of over-estimated gas resources on calculations of national energy ; the rush to prove reserves to gain investor support; balancing the exorbitant production costs; the disruption of existing local economies and the  resulting boom-bust symptom seen across numerous communities in US drilling areas; the consequences of deprecating property values and various long-term considerations such as affording to plug wells ad infinitum.

As far as job creation goes, it would be wise to do more homework before calling fracking ‘a labour-intensive process’. When investigating shale gas development it is critical to understand  that one’s references also need researching.  Many optimistic statistics around job creation have been provided by studies funded by the energy industry (for instance: the recent IHS Global  Insight Inc study or the 2010 Penn State study). It is also well-known that employment around gas drilling is limited to skilled workers who move from one drill site to the next and once  wells are in production, only a handful of employees are needed to manage a field of gas wells. Research material that has traced the actual number of jobs created in comparison to inflated  estimates is available and, to ensure accurate reporting and informed decision-making, it would be wise to take them into account.

A final note on the economics of gas development that, for some puzzling reason, is rarely approached in the debate in South Africa is the fact that, in this country, landowners do not own the mineral rights. Conversely, in the US, landowners stand to gain economically by leasing their mineral rights to gas companies. The economic model of Coasean bargaining, as illustrated by Forbes contributor, Tim Worstall, where national energy security is justified by financially compensating those who stand to suffer from the impacts of its production, does not apply in South Africa. However, many participants in the local fracking debate still rely on economic statistics from the US without taking this into consideration. There is no direct investment into communities via lease agreements or royalties off gas production. The primary financial benefit to the majority of Karoo residents or the general public would be limited to tax revenues on the production of gas or, once all the externalities have been accounted for, a possible cheaper form of energy.

Aside from overlooking questions around the economics of natural gas extraction, many of the issues that were recognized in the article were poorly examined. On the note of water contamination, local anti-fracking activists have limited most of their arguments to the impact on groundwater and Dr. Vermeulen is correct in admitting there is a minimal, but not zero, possibility that frack fluids would seep directly into shallow aquifers from the much deeper layer of shale. However, perhaps, due to a lack of research on both sides of the argument, the topic of water contamination remains poorly addressed. In short, there are various ways in which water can be polluted – initial drilling can puncture shallow aquifers, failures of cement casing present many opportunities for methane or frack fluid to escape the well, the risk of surface spillage throughout production and via the improper disposal of produced water. According to his statements in this article, Vermeulen failed to acknowledge the other possibilities – instances that should be common knowledge in his field of geological expertise – and, as such, is at risk of too simply dismissing any likelihood of water contamination.

Taking a step back, one has to acknowledge that the vast amounts of water used during drilling and hydraulic fracturing is permanently removed from the natural water cycle. In a country that is facing a dire water crisis, we need to assess whether or not we can casually eliminate water without refund – whether from the Orange, the Gariep or the interconnected deep aquifers of the Karoo. No technology exists to rehabilitate the produced water to its original quality because once it returns to the surface, it is laced with the original chemicals used in drilling and the contents they meet in the shale layer such as heavy metals, salts and naturally occurring radioactive material. Owing to its toxicity, this water has to be forever contained in such a way that it is never exposed to human, animal or plant life. Ironically, despite not having any adequate solution to this basic hurdle, gas drilling continues to accelerate on a daily basis.

Lastly, Vermeulen is at risk of making sweeping statements about his experiences in Pennsylvania. Simply spending some time inspecting what is currently happening in one state of the US would not provide a full understanding of shale gas development. After spending over a month in the US tracing the risks and benefits of fracking – from the advanced stages of production in Garfield County, Colorado to the bustling activity around recent drilling in Pennsylvania; from the regulatory agencies in the state of New York to the offices of prominent gas industries in Houston, Texas – I hesitate to draw any finite conclusions and continue to investigate the ever-evolving debate around fracking. My findings question Vermeulen’s description of the geographic footprint of gas wells as “extremely compact”. Owing to the steep decline in the gas yield from a well within its first year of operation, wells constantly need to be drilled to maintain a sustained flow. In addition, for a company to optimally develop a shale play, the standard practice in the US stands around 8 wells per square mile. Around Rifle, Colorado, for instance, gas wells are spaced every quarter mile.

 

It is concerning to note that Dr. Vermeuleun, speaking as a learned professional in the fracking debate, calls the moratorium misjudged or a hindrance to ‘establishing a knowledge base about fracking in South Africa’.  The context around natural gas development is enormously complex and, by the gas industry’s own admission, employs a technology that is still in evolution. Many academics, specialized professionals and medical experts – from across the world – have called for time to allow independent science and regulatory frameworks an opportunity to catch up with the unconventional gas boom.

The moratorium is a crucial time to encourage informed, inclusive multi-disciplinary discussion around potential gas development and, in doing so, further research and the arrival of new insights. Journalists, academics and citizens alike should contribute to such objectives by working through the half-truths, exaggerated concerns and unsubstantiated claims in order to assist a thorough risk-benefit analysis into natural gas development.  This would not only address the paucity of information in the country but also promote wider public consultation and, all in all, ensure that a national energy strategy is finely and responsibly calculated.

I understand Vermeulen’s call for geophysical testing and that, in order to accurately assess the conditions in the deep geology of the Karoo, there is a need for exploratory drilling. However, there are many other uncertainties around unconventional gas drilling and it is important to realise that not all the answers lie beneath the ground.

 

Jolynn Minnaar is the Director of un•earthed – an independent documentary investigating possible natural gas development in South Africa that is currently in post-production. Committed to thorough research and widespread consultation, Minnaar has devoted nearly two years to researching the complexities around hydraulic fracturing and has spent three months in the United States to gain experience and a deeper understanding into the controversial matter. If you would like to contact un•earthed please email unearthed.thedocumentary@gmail.com.