Event Recap

Fracking, short for hydraulic fracturing, is perhaps the most important innovation in the energy system in the last half century. The technological breakthrough in fracking, combined with directional drilling, has unleashed massive new supplies of shale oil and natural gas, cutting domestic and global energy prices dramatically, improving U.S. energy security and slashing pollution by displacing coal-fired power generation.

Tens of thousands of shale wells have been drilled across the United States over the past few years, making hydraulic fracturing a part of everyday life for many Americans. The widespread nature of the shale business has therefore raised questions about its local impacts. The Energy Policy Institute at the University of Chicago (EPIC) hosted an event on April 17th as part of its Inquiry & Impact Series that explored the costs and benefits of fracking based on recent research pioneered by University of Chicago scholars. The panel included EPIC’s inaugural policy fellows Sue Tierney and Jeff Holmstead and EPIC Director Michael Greenstone, and was moderated by Axios reporter Amy Harder.

The Local Costs & Benefits

Michael Greenstone, the Milton Friedman Professor in Economics, the College, and the Harris School, kicked off the event by presenting a pair of studies he co-authored on the local impacts of shale development and hydraulic fracturing. The first study found that development increases economic activity, employment, income and housing prices, with the average household benefitting by about $2,000 a year net of social costs. However, if additional evidence identified greater or unknown costs, such as health effects, the net benefits would change, Greenstone said.

Since health is such a critical factor, Greenstone decided to dig further by measuring infant health for children born near shale wells. He and his coauthors found that infants born to mothers living up to about 2 miles from a hydraulic fracturing site suffer from poorer health. The largest impacts were to babies born within about a half mile of a site, with those babies being 25 percent more likely to be born at a low birth weight.

Jeff Holmstead, who represents oil and gas companies in his capacity as a partner at Bracewell, LLP, said industry takes local health impacts seriously.

“From the industry perspective, most operators believe they’re better off with reasonable regulations than with no regulation at all, and I think over time we’ve seen more responsible development of shale resources,” said Holmstead, who served as the U.S. Environmental Protection Agency’s (EPA) assistant administrator for air and radiation during the George W. Bush administration.

Sue Tierney, who lives very close to shale development in Colorado, agreed that the large energy companies have improved their practices over the years.

“In the early periods of this shale gas revolution, where there were stealth entries into communities, people didn’t really know who was buying and selling things and for what purposes, and [there were] a lot of bad surprises as a result,” said Tierney, a former assistant secretary for policy at the Department of Energy under President Clinton and a state cabinet officer for environmental affairs for Massachusetts. “I think that is changing, but that left a bad taste in a lot of people’s mouths.”

Further, there are smaller companies that may not operate with the same rigorous practices as the larger companies, Tierney said.

The National Debate

With some communities banning fracking and others embracing it, tensions between its costs and benefits have turned a local issue into a national debate. Some, including former presidential candidate Bernie Sanders, have called for a nationwide ban on fracking.

Tierney, now a consultant at the Analysis Group, said that would be a “terrible idea” because that would mean “coal would come roaring back.”

“It’s not as though, if you ban fracking tomorrow, that you are going to have a step-function increase in renewable energy in a way that could satisfy the nature of energy demand that we have today,” she said. “Renewable energy is already entering the market at a fast pace, and a ban on fracking would make coal more attractive in the marketplace.”

She pointed out a benefit of natural gas that often seems counter-intuitive—its role in a low-carbon future.

“Absent really great storage or other technology, you cannot integrate renewables without natural gas” serving as backup generation, she said.

But that doesn’t mean that fracking shouldn’t be regulated at the federal level, said Tierney, adding that she has little hope there would be any new regulations developed under the current administration—a challenge made more difficult by a plethora of competing state regulations.

“There’s such a history of states’ rights on this. Much of the regulation we see over oil and gas production evolved from the foundation of states’ use of their police powers, rather than federal environmental regulation. That creates a very varied playground in terms of states’ policies and enforcement,” she said. “There’s been resistance to a more standardized process across the states. I do think that there are some things associated with air quality and associated with clean water issues where there are larger spillover effects on different communities.”

Holmstead largely agreed that the federal government should lead on cross-border issues posed by fracking such as air quality and methane emissions. However, states have evolved over the past 40 years to be able to confront environmental issues in oil and gas development and should be responsible for addressing localized issues, he said.

“When it comes to oil and gas development, it’s not true that Texas doesn’t care about environmental issues,” Holmstead said. “They actually have regulators who know a lot about the industry, that are involved in addressing environmental concerns, so I think a lot of it can be done [at the state level].”

How fracking is portrayed in the media has only complicated how fracking is regulated, regardless of what level of government makes the rules.

Harder brought up “Gasland,” a documentary by an anti-fracking activist that Harder said contained inaccuracies but nonetheless stoked anti-fracking sentiment in the United States and beyond. Holmstead said films like Gasland have shifted the industry’s focus from just legal issues and regulations to public relations.

“I think it’s been a challenge, but they’re at least now putting resources in trying to figure out how to better explain what they do and better address some of the concerns that are raised,” he said.

Tierney said films like “Gasland” demonize the issue.

“I think there are legitimate problems associated with local impacts and I think there are tremendous benefits associated with it,” she said. “I just think it’s incredibly complicated, and any time you’ve got a narrative that is just picking and choosing one-sided pieces of it…it’s a real problem.”

Natural Gas & Climate Change

Because of its role in displacing carbon-rich fossil fuels like coal, natural gas plays a major role in national efforts to address climate change. As such, Harder posed the question: Is natural gas a net benefit or net positive for addressing climate change?

Holmstead said it was a net-positive, reiterating its role as a cost-effective replacement for coal-fired power generation that is being retired and as a support mechanism for renewable energy development. Tierney and Greenstone both characterized it as positive in the short term but negative in the long run.

Despite its net-negative impacts on climate change, Greenstone pointed out that climate change isn’t the foremost issue for many around the world.

“If you’re sitting in India or China, it’s the deal of the century,” said Greenstone, who has extensively researched air quality and other issues in those countries.

“In addition to wanting cheap energy…what they really care about is that they can’t breathe,” he said, referring to how the switch from coal to natural gas can significantly reduce air pollution.

Shale development can result in emissions of methane, a potent greenhouse gas. Some methane is intentionally combusted as a byproduct during fracking (a process known as “flaring”), while some can also leak out of the gas distribution system—an issue that is increasingly important as U.S. consumption of natural gas has increased substantially in recent years.

That’s an area in which industry and regulators could work together, Holmstead said.

“Within the industry…there are companies that believe it’s important to have federal regulation,” he said. “They believe that they would be better off in terms of public perception if there is reasonable federal regulation of methane or related emissions.”

“But they won’t advocate for it,” interjected Tierney.

“Actually, some are,” Holmstead said. “But they’re not going to be doing it publicly.”

This event is part of EPIC’s Energy Inquiry & Impact Series, designed to explore the latest energy data coming out of the University of Chicago and their impacts on policy discussions. Cutting-edge findings will serve as the launching pad to frame these deep-dive conversations, as researchers and EPIC policy fellows navigate ways to translate research into solutions.

Agenda

Tuesday, April 17, 2018

5:00 pm–5:30 pm

Registration and hosted bar (21+) opens

5:30 pm–5:45 pm

Event Begins: Welcome and introductions by Michael Greenstone

5:45 pm–6:45 pm

Panel: Amy Harder (Moderator), Greenstone, Jeff Holmstead and Sue Tierney

6:45 pm–7:00 pm

Q&A

Areas of Focus: Energy Markets
Definition
Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Fossil Fuels
Definition
Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...
Renewable Energy
Definition
Renewable Energy
Lower technology costs and supportive public policies are driving an increase in renewable energy in markets around the world. EPIC research is assessing the costs, benefits, and efficiency of policies...
Electric Power
Definition
Electric Power
As the electric power system faces new pressures and opportunities, EPIC research is working to identify the mix of policies needed to accelerate the global transition to clean, reliable, affordable...
Energy Efficiency
Definition
Energy Efficiency
Improving energy efficiency is lauded as a promising way reduce emissions and lower energy costs. Yet, a robust body of research demonstrates that not all efficiency investments deliver. EPIC faculty...
Environment
Definition
Environment
Producing and using energy damages people’s health and the environment. EPIC research is quantifying the social costs of energy choices and uncovering policies that help protect health while facilitating growth.
Air Pollution
Definition
Air Pollution
Air pollution from fossil fuel combustion poses a grave threat to human health worldwide. EPIC research is using real-world data to calculate the effects of air pollution on human health...
Hydraulic Fracturing
Definition
Hydraulic Fracturing
Hydraulic fracturing is perhaps the most important innovation in the energy system in the last half century, but nearby communities are concerned about its potential effects on water quality, public...