4 Sep 2013

Fracking, oil and pollution

This may not be the best business model
Last week, I said that the problem with oil and (natural) gas is not the way that it's conveyed to market, but demand (leading to GHG emissions) and pollution related to production.

It's economically easy to reduce demand by taxing oil/gas consumption. It's not politically easy because most people prefer cheaper energy today to a viable environment tomorrow. (Alternatively, politicians take bribes from oil/gas companies and ignore people's wishes.)

Now let's talk about pollution from "unconventional" sources such shale oil and gas that's produced from oil sands and/or fracking. I am talking about these methods because:
  • We're pretty familiar with pollution from conventional production methods
  • Unconventional production has a disproportionate impact on water (groundwater in particular)
  • Canada (where I'm living) has a lot of activity in oil/tar sands shale gas/oil
So here's my take on what's happening:

First of all, oil and gas companies are making lots of mistakes
Second, we see that they are doing this with permission of regulators and politicians
This is not happening in a vacuum -- people can see -- so industry seems to care
But it doesn't seem that they do in reality
The sad thing is that it's not impossible to improve
So, what I'm seeing here is a backlash against oil/gas firms for their abuse of regulations, communities and the environment. Industry may think that it can insulate itself with royalties, bribes and jobs, while ignoring best practices. I don't think so, and neither does the former president of Shell.

Bottom line: As I said before, oil and gas companies need to clean up after themselves. It may cost a little money now, but it will save a LOT of money later.


Anonymous said...

I think you're conflating some issues here. Although hydraulic fracturing and oil sands production are both covered by CAPP and the new AER that is where most of their similarities end with respect to oversight/representation.

COSIA does not work on fracking issues so slamming COSIA here doesn't make sense. Furthermore a lot of their work has been slow to start due to have to sort through the legalese of over 10 giant companies. With that many stakeholders the fact is that it is going to take awhile for results to be seen from them. However there should be results coming up soon from the projects they inherited from OSLI. Go check out www.osli.ca for more information in that area.

Back to hydraulic fracturing, earlier in 2013 the Alberta Government did a consult on water in the province. Hydraulic fracturing was one of the identified target areas. We're still waiting on results that have undoubtedly been delayed by the flooding in Alberta. The results of that should be a clear indicator on where policy and oversight will be going *in Alberta* on this issue. British Columbia (where you are staying) is a whole other bag of worms.

David Zetland said...

@Anon -- thanks for the detail. I didn't mean to conflate fracking and oil sands, in Alberta v. elsewhere. My point was that unconventional has got similar issues.

WRT AB, the biggest problem (to me) is failure to clean up the oilsands tailings ponds. Fracking in BC or the US seems to have more issues with fast money and bad regulations than gross pollution...

freude bud said...

I think you mistake why the govt is reluctant to simply impose a carbon tax or raise the tax on gasoline, which is that the tax would be regressive and possibly be onerous on folks who cannot afford it, but still need to drive long distances to get to work.

Re: fracking it does occur to me that perhaps any groundwater pollution may be due to a side effect of fracking--small earthquakes--which could be fracturing the well casings ... not sure what the remedial action would be if that were the case.

David Zetland said...

@Freude -- "regressive" is often used for political cover. In LDCs, subsidies benefit the rich more than the poor. In the US, I'd say the same, except that commuters are often straining to pay suburban mortgages (so you've got a point). That issue can be addressed by per capita rebates (=helps the poor) and/or taxes on fuel near populated areas (i.e., all of CA but not MT)

freude bud said...

Well in the suburban sprawl and rural areas which constitute most of America the absense of public transportation (or, for that matter, any viable public transportation scheme) and where people are driving an hour or more to work, it may be true that the current low tax environment benefits the rich more, but the poor -- and likely the lower middle and even middle classes -- will struggle to pay for their transportation requirements if you simply impose a tax on carbon consumption.

David Zetland said...

@Freude -- (1) poor people can "afford" to live in the middle of nowhere b/c of cheap gas, which means that they're trapped when the price rises. (2) I've argued many times that a carbon tax should be rebated per capita, such that poorer people (those who use less than average carbon) would be more than compensated.

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