U.S. Fracking Debate: Environment vs. Economics

[00:00:00] Speaker 1: Dr. Porter, you have just put out a report on fracking. Help us untangle this as we figure this out state by state, city by city. What is the right way to think about this decision that counties have to make about fracking? [00:00:14] Speaker 2: Well, I think it's interesting that fracking has become kind of a dirty word or swear word in America. And yet, fracking is a remarkable innovation that's allowed the United States to actually achieve a substantial advantage in energy, energy costs, the cost of electricity, the cost of natural gas. It's the single biggest driver of where our economic growth right now. And yet, communities are fighting it. And the reasons are there's a very political debate about the environmental impacts, environmental implications. And we did this report to try to sort out what's really going on here and what the country should do. [00:00:54] Speaker 1: Could the oil and gas industry be more transparent about what they're doing in order to assuage these concerns that cities have? [00:01:01] Speaker 2: We think so. This study was done with Boston Consulting Group, one of the leading consulting firms in the world. We did it as a partnership with HBS to really try to understand this issue. The industry is making a lot of progress. The environmental issues are being improved and improved and improved. But the industry has been very untransparent. They've sort of been taking on these communities and advocating their cause. I think they've made the problem worse. [00:01:27] Speaker 3: One of the advantages you have is a double degree in engineering from Princeton in aerospace and mechanical engineering. There's a deep distrust of the technology and technological progress of this science. [00:01:38] Speaker 2: There's very significant environmental impacts, Tom, that happen in a variety of ways, water, seismic, and others. But actually look at the data and look at the progress that we're making on actually minimizing those risks. The progress is substantial and we can make more. And what's really important is you can reduce those risks, reduce that water issue, reduce those flaring issues at very low cost. So there's no reason why we can't make progress. What are the risks? [00:02:11] Speaker 1: How do we quantify them? [00:02:12] Speaker 2: Well, there's a whole variety of risks. They fall into a number of buckets. Water risk, where there's a lot of water used in this process. And the question is, are we going to pollute that water? And then there's issues of injecting that water back into the ground. That's what's actually caused the earthquakes. There's issues of congestion. There's issues of chemicals. There's issues of, you know, land. [00:02:36] Speaker 3: Yeah, we're going to have a seven Richter earthquake in New York State. I mean, the sidebar in New York State is interesting in that they've basically said, there's no science. We really don't know what's going on, so we're just going to stop doing it. [00:02:48] Speaker 1: Well, that's the European approach. I mean, this is one of the things that I think fascinating about American competitiveness, European competitiveness. Europeans say, you've got to prove to us that there's no harm before you can do it. Americans say, you've got to prove to us that there is harm before we stop you. [00:03:01] Speaker 2: Yeah, well, and the problem is that the industry was in denial on the earthquakes. They just said, oh, there's no earthquakes. Okay, there are earthquakes. I mean, the data is overwhelming. Now that we're starting the earthquakes, we know why they happen. It's the injection wells. We know that when you do those wells near a fault, you have an earthquake. If you stay away, you don't. We can solve this problem, but we're having such a politicized debate that we're actually not moving ahead. And, Brenda, this is the biggest economic opportunity America has for the foreseeable future. This is what's driving whatever little economic growth we have right now. We've got to work through a win-win pathway here where we can get this economic benefit while dealing with these legitimate environmental issues. [00:03:45] Speaker 1: To get these legitimate environmental issues right, what is the proper role of the state and federal governments? What could be done? [00:03:52] Speaker 2: Well, I think they're moving. The states now, most states highly regulate this. The regulatory standards are getting better and better. There's cross-state collaboration now to make the standards the most effective and the most up-to-date. But, you know, states have gaps to fill. And the biggest issue is more not the regulation but the compliance. States are still struggling with making sure that all the industry operators are actually following the rules. And it turns out that a lot of the people, you know, the Anadarkos, you know, have tremendous record. It tends to be the little guys that are not so sophisticated. [00:04:29] Speaker 3: So quickly, Professor Porter, are you going to give a barrier to entry to the Department of Energy? [00:04:33] Speaker 2: Tell them to go away? Not go away, Tom, but we need to approach this in a way. Right now in America, we're paralyzed from making progress on the most important issues we face, on tax policy, on trade policy, on immigration policy. We're having the same problem here on energy. It's our biggest advantage. It's historic. But yet we're having a big fight across the stakeholders rather than getting together and figuring out how to solve these problems. And they can be solved.