SF Lunchtime Read: A Colossal Fracking Mess

Excerpt below…….

Early on a spring morning in the town of Damascus, in northeastern Pennsylvania, the fog on the Delaware River rises to form a mist that hangs above the tree-covered hills on either side. A buzzard swoops in from the northern hills to join a flock ensconced in an evergreen on the river’s southern bank.

Stretching some 400 miles, the Delaware is one of the cleanest free-flowing rivers in the United States, home to some of the best fly-fishing in the country. More than 15 million people, including residents of New York City and Philadelphia, get their water from its pristine watershed. To regard its unspoiled beauty on a spring morning, you might be led to believe that the river is safely off limits from the destructive effects of industrialization. Unfortunately, you’d be mistaken. The Delaware is now the most endangered river in the country, according to the conservation group American Rivers.

That’s because large swaths of land—private and public—in the watershed have been leased to energy companies eager to drill for natural gas here using a controversial, poorly understood technique called hydraulic fracturing. “Fracking,” as it’s colloquially known, involves injecting millions of gallons of water, sand, and chemicals, many of them toxic, into the earth at high pressures to break up rock formations and release natural gas trapped inside. Sixty miles west of Damascus, the town of Dimock, population 1,400, makes all too clear the dangers posed by hydraulic fracturing. You don’t need to drive around Dimock long to notice how the rolling hills and farmland of this Appalachian town are scarred by barren, square-shaped clearings, jagged, newly constructed roads with 18-wheelers driving up and down them, and colorful freight containers labeled “residual waste.” Although there is a moratorium on drilling new wells for the time being, you can still see the occasional active drill site, manned by figures in hazmat suits and surrounded by klieg lights, trailers, and pits of toxic wastewater, the derricks towering over barns, horses, and cows in their shadows.

Damascus and Dimock are both located above a vast rock formation rich in natural gas known as the Marcellus Shale, which stretches along the Appalachians from West Virginia up to the western half of the state of New York. The gas in the Marcellus Shale has been known about for more than 100 years, but it has become accessible and attractive as a resource only in the past two decades, thanks to technological innovation, the depletion of easier-to-reach, “conventional” gas deposits, and increases in the price of natural gas. Shale-gas deposits are dispersed throughout a thin horizontal layer of loose rock (the shale), generally more than a mile below ground. Conventional vertical drilling cannot retrieve shale gas in an economical way, but when combined with hydraulic fracturing, horizontal drilling—whereby a deeply drilled well is bent at an angle to run parallel to the surface of the Earth—changes the equation.

Developed by oil-field-services provider Halliburton, which first implemented the technology commercially in 1949 (and which was famously run by Dick Cheney before he became vice president of the United States), hydraulic fracturing has been used in conventional oil and gas wells for decades to increase production when a well starts to run dry. But its use in unconventional types of drilling, from coal-bed methane to shale gas, is relatively new. When a well is fracked, a small earthquake is produced by the pressurized injection of fluids, fracturing the rock around the well. The gas trapped inside is released and makes its way to the surface along with about half of the “fracking fluid,” plus dirt and rock that are occasionally radioactive. From there, the gas is piped to nearby compressor stations that purify it and prepare it to be piped (and sometimes transported in liquefied form) to power plants, manufacturers, and domestic consumers. Volatile organic compounds (carbon-based gaseous substances with a variety of detrimental health effects) and other dangerous chemicals are burned off directly into the air during this on-site compression process. Meanwhile, the returned fracking fluid, now called wastewater, is either trucked off or stored in large, open-air, tarp-lined pits on site, where it is allowed to evaporate. The other portion of the fluid remains deep underground—no one really knows what happens to it.

Trade Drunk. Refill. Lose $10 Million.

Alcohol-induced blackouts have produced many unintended consequences, but pushing up the global price of oil and losing $10 million must rank among the most novel.

I checked with the judges. This is another GREAT MOMENT IN BANKING HISTORY.

Thanks to reader Wahl for the tip.

Weekend Read #1: The True Cost of the Oil Spill

Ezra Klein in Newsweek.

A little basic, but he consistently brings smart, accessible analysis to the table. Enjoy.

It seems like an easy question. You might ask if I mean premium or regular, and where in the country I’m buying. Beyond that, though, the price is displayed in giant numbers on most thoroughfares. It’s such common knowledge that we ask politicians to rattle it off to show that they retain some awareness of the world they claim to represent. But as the sludge choking the Gulf of Mexico shows, nothing is easy when it comes to oil—especially the price.

Most of us would call the BP spill a tragedy. Ask an economist what it is, however, and you’ll hear a different word: “externality.” An externality is a cost that’s not paid by the people using the good that creates the cost. The spill is going to cost fishermen, it’s going to cost the ecosystem, and it’s going to cost the area’s tourism industry. But that cost won’t be paid by the people who wanted that oil for their cars. It’ll fall on taxpayers, on Gulf Coast residents who need a new job, on the poisoned wildlife.