Change in Water Quality after Disclosure Regulations Became Effective
Following local health and environmental concerns in communities surrounding hydraulic fracturing sites, many states began requiring that hydraulic fracturing firms disclose their drilling activities and the chemical composition of their fracking fluids. University of Chicago Booth School of Business Professor Christian Leuz and his co-authors set out to determine what impact those mandatory disclosures had on the firms’ behaviors, on the public’s actions, and on the local water quality itself. They discovered that the transparency led to changes across the board.
The researchers found that the water quality in watersheds with hydraulic fracturing activity consistently improved after the state mandated the disclosure of information. They studied salt concentrations because they are considered signatures for impact by hydraulic fracturing. In high amounts, they can stunt bone development, increase blood pressure, harm aquatic life, and more. The authors found that salt concentrations declined by as much as 17.8 percent (chloride decline). Other water pollutants not specific to hydraulic fracturing showed no significant decline.
Consistent with the decline in salt concentrations, the researchers found that the hydraulic fracturing firms made several changes after the mandatory disclosure rules went into effect. For example, firms used fewer hazardous and chloride-related chemicals in hydraulic fracturing fluids and there were fewer spills, leaks and other accidents. The researchers also noticed that firms were drilling about 5 percent fewer new wells, contributing to about 14 percent of the decrease in water pollution.
The improvements in water quality were greatest in places where there was more public pressure for change. For example, salt concentrations decreased the most in areas with a greater presence of local environmental NGOs and in counties with more local newspapers. Counties with more news articles discussing hydraulic fracturing and water pollution and in states with more Google searches for hydraulic fracturing after the disclosure mandate also saw a decrease in salt concentrations. Water quality also improved in areas where publicly traded firms owned a larger fraction of wells, consistent with the idea that listed firms likely face more public scrutiny than private operators. When the disclosure mandates required a timelier disclosure and offered fewer trade secret exemptions this also led to greater improvements in water quality. This suggests that transparency through disclosure mandates is a successful tool to spur public engagement and change.