The Fracking Industry’s Black Swan
January 20, 2012
This week I attended a conference hosted by the United States Energy Association entitled “8th Annual State of the Energy Industry Forum” at the National Press Club in Washington, DC. As the title suggests, this event was a gathering of industry leaders for industry leaders. Also in attendance were a vocal band of fracking insurgents who occupied the floor and shouted down the American Petroleum Institute’s Jack Gerard.
The conference’s late afternoon session focused on the shale gas boom. Dovetailing with the President’s recent showing of support for fracking, the panel participants echoed the need to develop our nation’s natural gas resources in a safe and responsible way. Almost as a nod to the afternoon’s earlier disruption, Skip Horvath, President & CEO of the Natural Gas Supply Association, intimated that the public health concerns of community members “…come from the heart and we take them seriously”.
Part of Skip’s presentation described what companies call the Black Swan for the industry. Unlike the Natalie Portman film, a Black Swan, in economic jargon, is a low probability, high-impact event. These include political instability, severe regulatory constraint, and broad systemic risks. In short, the kind of thing that could devastate an industry, even if the chances are remote. Among the systemic risks, Skip tells us, are seismic activity and detrimental public health effects. To alleviate investor concerns, both Skip and fellow panelist Regina Hopper, President & CEO of America’s Natural Gas Alliance, insist that to avoid these risks, the industry must rely on sound science.
I agree. Community concerns do come from the heart, should be taken seriously, and we must rely on sound science. However, I’m not convinced the science so far points to anything other than an impending Black Swan. The Environmental Protection Agency (EPA) recently announced that hydraulic fracturing caused water contamination found in monitoring wells in Pavillion, WY. Responding to similar concerns in Dimock, PA, the EPA will in a couple months release results from a study there.
The United States Geological Survey (USGS) recently released another report that links fracking with earthquakes in Oklahoma. The Buckeye state quickly issued a moratorium on new fracking permits after earthquakes there were attributed to hydraulic fracturing. Even industry’s principal claim- that natural gas is a cleaner burning fossil fuel- has now come under scrutiny. Each happened only in the last few months.
Regina Hopper pointedly said that one key to industry success is a continuing dialogue between natural gas proponents and the affected communities. I believe she is genuine. I too believe in dialogue and sound science. Rather than go the way of the tobacco industry, my hope is that the energy industry will truly embrace science’s contribution toward safe and responsible natural gas development. Even when the results do not always support their position.
For more information:
- Venting and Leaking of Methane from Shale Gas Development: Responses to Cathles et al. Robert W. Howarth, Renee Santoro, and Anthony Ingraffea http://184.108.40.206/shalegasghgreport.html
- United States Geological Survey report: Examination of Possibly Induced Seismicity from Hydraulic Fracturing in the Eola Field, Garvin County, Oklahoma The pdf is linked to in Texas Sharon's blog post. http://www.texassharon.com/2011/11/05/six-fracking-earthquake-notices-from-oklahoma-last-night/
- Environmental Protection Agency's information on Pavillion, WY study http://www.epa.gov/region8/superfund/wy/pavillion/index.html