Energy Industry Threatens Water Quality, Sways Congress with Misleading Data

By Abrahm Lustgarten, ProPublica. Posted July 9, 2009.

Industry reports say that if federal regulations are applied to hydraulic fracturing, more than a third of onshore gas wells would be closed and oil and gas companies would spend $10 billion complying with the law in its first year. The federal government would lose some $1.2 billion in revenue.

But advocates for the federal legislation say the industry is misleading the public into a false choice between the economy and the environment.

"We are all for using science-based information," said Amy Mall, a senior policy analyst for the Natural Resources Defense Council. "But the underlying information doesn’t really tell the story they claim it does."

Nonetheless, the arguments have gained traction in Congress and have eroded support for new regulation.

Rep. Dan Boren, D-Okla., told his fellow members in a recent hearing that "these folks are laying people off -- people are hurting in my district." Rep. John Salazar, D-Colo., who sponsored legislation to regulate fracturing in 2008, but declined to add his name to this year's bill, told ProPublica that "developers may have legitimate concerns about the impact that removing the exemption may have on their ability to find and extract oil and gas."

To keep the legislation alive, Diana DeGette, D-Colo., its main sponsor, has shifted gears to seek environmental studies and hearings rather than a quick passage into law.

"The opposition has been throwing out scare tactics and mischaracterizations of what she is trying to do," said DeGette's spokesman, Kristofer Eisenla. "Unfortunately the oil and gas guys came out of the barn storming."

Fuzzy Numbers

The study that has received the most publicity (PDF) is also among the most misleading.

The report, which evaluates the costs of regulations for the oil and gas industry, was written for the Department of Energy by a consulting company also used by the energy industry, Advanced Resources International, or ARI. It contains a table (PDF) listing seven specific processes it says would be mandated under the proposed federal regulations, and what those processes would cost -- a total of $100,505 per well. Among the listed items is "state of the art" fracture imaging, at a per-well average cost of $37,500, and three-dimensional fracture simulation, at a cost of $7,500.

But a footnote reveals that these figures are based on memo sent to a DOE official by another consulting firm in 1999. The report’s author said they haven’t been updated to reflect technological advances or substantial shifts in the drilling business over the last decade.

Furthermore, none of the tests listed in the table are mentioned in the text of Safe Drinking Water Act, the federal law that would apply to hydraulic fracturing, according to an EPA spokesperson in Washington. And they aren’t mentioned in the bill being floated in Congress either.

"It's a sense of magnitude of the impacts, not a sense of absolute accuracy," said Michael Godec, Vice President of ARI and author of the report. The regulatory requirements were interpolated on a "bad-case" scenario, he explained, because the federal laws are not specific. "We took some liberties. You have to make some assumptions about what might be required."

Godec believes that many of the processes listed in the report are already being practiced to a greater degree than they were in 1999, meaning that even if they were required they may not be additional burdens at all. But he said that anecdotal conversations with drilling companies confirm that the report’s conclusions are still “about right.”

              

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Abrahm Lustgarten is a former staff writer and contributor for Fortune, and has written for Salon, Esquire, the Washington Post and the New York Times since receiving his master's in journalism from Columbia University in 2003.

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