The Economist: To frack or not to frack
That is the question
In college, my friend Rob kept both far-right and far-left magazines on his coffee table. When I asked why he couldn’t make up his mind, he replied, “The truth emerges somewhere between the extremes.” Rob’s point is well taken. Democracies must govern from the center even though what becomes middle ground may start as extreme.
Fracking or hydraulic fracturing – a technology for oil and gas extraction from shale rock — is nothing new. In recent years, it has taken off with advanced horizontal drilling. Imagine boring into the ground and installing a 5-1/2-inch pipe, 8,000 feet down, and two miles horizontally. With this latest iteration of fracking technology, the peak oil theory was busted, and today we have abundant reserves in the United States and probably beyond. As a result of more cost-effective methods in our American soil and geopolitical actions by Saudi Arabia, oil prices plummeted by over 50 percent in late 2014.
This has significantly curtailed fracking activity in Colorado and throughout the country. But most producing wells are still operational and the outlook for the energy industry in coming years entails lower prices – roughly 25 percent to 35 percent down from what we experienced during the last five years. Of course, geopolitical supply shocks can always create volatility, but American production alone promises cheaper fuel costs.
But that all assumes we allow fracking.
In 2014, Pew Research Center asked the American public and the American Association for the Advancement of Science (AAAS) whether they favored the increased use of fracking. The results showed 31 percent of the public and 39 percent of scientists favored increased use. And this response is puzzling to me because “drilling down” finds politically neutral geologists comfortable with the risks presented by fracking if done properly.
Well-executed fracking means knowing the potential for localized problems and avoidance of areas and methods that threaten underground aquifers and could cause earthquakes. The key is for companies and regulators to be informed about subsurface geological structures before drilling. They should also pursue best practices with cement and metal casings, fracking fluids that are almost entirely sand and water, and injection wells for waste water.
Part of the problem with the perception of the industry comes because until recently, technologies were emerging and as a result there were many industry secrets and many smaller drilling companies. To economists, this is a recipe for boom-time tragedies thanks to a collective race-to-the-finish mentality, mixed with aggresive investment and a lack of operating and regulatory attention paid to vital details. However, these risks are manageable.
To completely ban fracking would eliminate benefits to the emerging world, our nation and Colorado. While I agree the developed world should seek more sustainable energy sources and work to reduce CO2 emissions, an abrupt exit from fossil fuels is simply not feasible. Instead, we should envision a smooth transition with ambitious goals, including: substituting gas and coal with natural gas to cut CO2 emissions/BTU by 25 percent to 50 percent, incentives for renewable energy, revisiting new nuclear technologies, energy conservation, CO2 sequestration, and investment in electrical storage technology, a key to retiring our fossil fuel paradigm.
With its strong scientific research base, geography and geology, Colorado is well positioned for accessing cheap natural gas and reliable solar energy. This should serve the state well if we take a leadership role advocating for rational energy policies. Let’s combine these economic strengths alongside Rob’s approach to coffee-table reading with honest inquiry into the extremes.