17 May 2013

Fracking pollution, property rights and payments

Grant McDermott wrote a nice comment on fracking, and I left this reply:*
  • There is GOING to be some pollution. The question is how much.
  • It would be useful to compare lifecycle pollution from fracking to other energy sources.
  • The precautionary principle is too strong, but it would be good to have a strong penalty -- and fast process to administer it -- for pollution (or lack thereof -- in PA and NY).
  • This (social) discussion should not compare peer review (which has problems) vs populism (ditto), but property rights vs regulation.
  • Grant discusses regulation versus common law remedies. Regulation will crowd out common law and it's often myopic and/or biased. Common law can work and it would not take too long to find victims. I reckon that Deepwater would not have happened with an (open ended) common law liability. (The TX fertilizer plant that exploded "only" had $1 million in insurance but did $100 million in damages.)
I've said some other things on fracking, regulation and the cost of cleanliness here.**

* Grant and I talked during a hangout yesterday: 64 min on YouTube or mp3. He has written more on these topics, i.e.,
** The other day, I claimed that Canadian tarsands producers could keep the environment clear (except accidents) for about $5 per barrel produced. Yes, that's $5 less profits, but probably worth it if the result is "ethical oil." According to the wiki-brain, Canada has 170 billion recoverable barrels. Profits/barrel were $22 in 2007 (when prices were in the $60-70 range), so there's scope for spending on cleaner production. Would $5/barrel cover it?*** (Semi-related: Oil company share prices and behavior are not pricing in a low-carbon future. Government failure or market failure?)

***I spoke to a guy from Shell on Wednesday who claimed that Shell could reduce carbon emissions at Alberta's tar sands by 40% at a cost of $1 per barrel. My figure is based on the cost of desalination ($1/m3), noting that it takes about 5 bbl of water to produce 1bbl of shale oil. Since 5bbl is 0.8 m3, that translates to $0.80/bbl of oil, given "salt water" as an input. If the water's 6x more polluted, it would cost $4.80/bbl.