High drama and emotional pleading frequently replace scientific understanding of very complex issues.

The November 2013 elections reminded us of the vociferous activism of the anti-fracing movement. In Colorado, for example, voters in three counties approved measures placing outright bans on fracing. Adding to the fire is another effort in the Centennial State proposing a statewide ban altogether. Many similar initiatives are occurring nationwide.

Does the anti-fracing movement pose any serious risk to the industry? If so, how?

Driven by such dramatic anomalies as the Deepwater Horizon tragedy, critics of the oil and gas industry have gleaned enormous amounts of political capital, accusing the petroleum business of a litany of sins, from conspiracy and price gouging to “excess” profits and market manipulation. The fanciful morality play of ”good versus evil” is fodder not only for Washington, but for the legion of reporters and journalists who lack any fundamental understanding of petroleum economics. In the end, the public is fed an endless barrage of simple explanations wrapped in hyperbole.

High drama and emotional pleading frequently replace scientific understanding of very complex issues. In the meantime, the public demands plentiful affordable energy, supporting policymakers who introduce an endless stream of rules and regulations that inject the market with a maze of economic inefficiencies. In the end, complicated issues are addressed by narrow and simplistic solutions. Politically expedient legislation is passed amid crisis-mentality thinking, resulting only in costly short term fixes.

Welcome to the world of anti-fracing.

First, some background: The anti-fracing movement is rooted in the political malaise of the 1970s, an ideological descendant of President Jimmy Carter’s mantra of embracing frugality in an age of increasing scarcity. But if anything has stood the test of time, it is one basic fact: The American public remains woefully uninformed about energy, while often disingenuous politicians, following Carter’s footsteps, preach the gospel of shortages, environmental ruin and even the end of civilization itself.

Not only does the anti-fracing cause lack serious scientific unanimity, it is frequently based on worst-case scenarios, imposing regulatory burdens that are either redundant or uneconomic. A number of criticisms deserve special attention.

For example, the political disingenuousness of the anti-fracing movement is astonishing. A curious twist in a number of recent anti-fracing laws is an outright higher appeal given to so-called “community rights.” Such claims not only suffer from legal overreach, but directly challenge the very notion of private property. Central to the “community rights” argument is preemption, the legal concept that a local law may supersede a state (or even federal) regulation. In Pennsylvania and Colorado, local laws banning fracing are being rightfully challenged by state oil and gas associations.

The timing of the anti-fracing movement is also a bit curious. Even though the process has existed since the late 1940s, fracing has only recently become the object of populist disdain. One recent survey indicates that anti-fracing activism tends to be most vocal in counties that voted red in the 2012 election, suggesting partisan critics employ the image of “Big Oil” as a means to mobilize Democratic constituents in predominantly Republican strongholds.

Anti-fracing activists also ignore the scope and scale of energy transformations. Consider the case of coal. The public often assumes the substance to be an archaic energy source. In fact, coal was not eclipsed as a major basis of electricity worldwide until the mid-1960s. Indeed, coal not only remains the third-largest source of power in the U.S., but demand for the substance is growing rapidly and dramatically in India, China and yes, even “green-conscious” Europe. Despite its old-fashioned image and environmental risk, coal remains a dominant player because of its utility, low cost and abundance. Coal is not dead, and neither are other fossil fuels.

Anti-fracing proponents also ignore historical reality. Government intervention artificially and unnecessarily warps the market. A famous case in point? The natural gas industry. Citing its authority over interstate commerce, Congress passed the Natural Gas Act of 1938, giving the Federal Power Commission the authority to set price and production controls. The law, later upheld by the Supreme Court in Phillips Petroleum Co. v. Wisconsin (1954), proved dreadful.

The law not only encouraged producers to avoid interstate distribution and focus solely upon local markets, but the resulting economic distortion led to significant interregional price discrepancies and artificial shortages. Just as the U.S. engaged in a major transition from coal to natural gas after World War II, consumption of the latter actually declined.

But Washington’s meddling did not end there.

In 1978, Congress passed two additional pieces of legislation, the Natural Gas Policy Act and the Power plant and Industrial Fuel Use Act. These two laws placed additional restrictions upon the natural gas industry, including the banning of the use of gas for electricity generation. The result was an increase in coal consumption and a concomitant rise in carbon emissions. Eventually, government regulation and price controls led to dramatic shortages of gas, forcing policy makers to re-examine the regulatory environment. As a result, federal controls were finally lifted with the Natural Gas Decontrol Act of 1989.

So much for government intervention.

The history of regulatory failure in the U.S. gas industry in the 20th century offers a number of key lessons. First, government administrators often lack the necessary, specialized expertise to adequately make decisions involving such highly technical knowledge. Second, unlike many operators, the government is not accountable to shareholders in order to ensure a job is well done. Third, unbeknownst to many politicians and the public at large, the O&G industry is keenly aware of the difficulties arising from fracing, and is in fact taking bold steps to rectify externalities. Lastly, deregulation opens the market to innovation, capital infusion and entrepreneurship.

The strategic lessons for petroleum executives are significant. In his monumental, two-volume study of state intervention in the industry, Oil, Gas and Government: The U.S. Experience (1996), Dr. Robert L. Bradley Jr., currently an adjunct scholar at the Cato Institute in Washington, D.C. and founder and director of the Institute of Energy Research, puts forth a fully articulated theory explaining the risks and dynamics of regulation. Bradley contends that, since the early 19th century, government intervention in the oil and gas industry has proven continuously, and predictably, counterproductive.

Time and again, Congress and government regulators behave as nothing more than political (and economic) opportunists, promoting short range goals for personal gain or to secure political clout. According to Bradley, one of the dangers of government (or “external”) intervention is that, invariably, the ills and inefficiencies created by regulation impel officials to impose additional regulation in a vain attempt to correct the wrongs wrought by the original legislation. This leads to an aimless, spiraling maze of laws that worsens the original problem, not only at the expense of various industry sectors, but the ordinary consumer.

Our nation’s energy future is considerably less bleak than the picture painted by anti-fracing activists. Thanks to horizontal drilling and fracing, the U.S. Energy Information Agency (EIA) states that 29% of total crude production in the United States, and 40% of natural gas, comes from shale. Out of 33,000 domestic gas wells drilled annually, at least 90% use fracing. And if those numbers are not impressive enough, consider the following. As recently as 2000, shale gas made up only 1% of all gas produced in the U.S. By 2010, that number surpassed 20%, and by 2035 as much as 46% of natural gas will be derived from shale.

With an extant workforce and a viable pipeline infrastructure, gas currently accounts for 20% of our energy production, and will be pushing 50% by midcentury. Until “alternative” means of energy can overcome often serious externalities, vainglorious pronouncements about a “new epoch” in the field of energy remain nothing more than political doggerel. As the world’s population reaches 7 billion (a number expected to reach 9 billion by 2040), the need for affordable, reliable and plentiful energy grows exponentially. Economic reality always trumps political naiveté.

Nevertheless, the specter of government intervention remains. Consider recent proposals by Congress. In 2009, U.S. Rep. Diana Degette (D-Colo.) sponsored the Fracturing Responsibility and Awareness of Chemicals Act (or “FRAC Act”). The bill sought to amend the Energy Policy Act of 2005, which excuses operators from disclosing the proprietary makeup and combination of fracing chemicals. Though the FRAC Act never became law, it should serve as the proverbial ”canary in the coal mine” regarding the potential of federal intervention: In May 2013, the FRAC Act was reintroduced by Degette and, in the Senate, by Sen. Robert Casey (D-Pa).

However, there are attempts to curtail this trend. In July, 2013, Rep. Bill Flores (R-Texas) introduced the Protecting States’ Rights to Promote American Energy Security Act. Flores’ bill would prohibit the Department of the Interior from enforcing any federal regulation related to fracing that is already addressed by state regulation. The Democratic-controlled Senate will most likely ignore the proposal, and Obama has threatened to veto it.

The lesson here? When it comes to fracing, the industry should make every effort to limit or minimize the potential for regulatory risk.

We are bearing witness to a massive paradigm shift in the industry, whereby the United States is on the cusp of becoming (largely) energy independent, relegating the “peak oil” rhetoric of limited supply, declining production and constrained economic growth to the dustbin. Fracing and horizontal drilling are directly responsible not only for a growing revitalization of the moribund U.S. steel sector, but strengthening the domestic petrochemical industry, lowering fuel costs and significantly reducing greenhouse gas (GGE) emissions (The U.S. is set to surpass the standards set by the 1998 Kyoto Protocols, even though it was not a signatory). Across the United States, hundreds of thousands of new jobs have been created, pumping vast quantities of capital into economically depressed rural areas while providing massive amounts of tax revenue for many state governments already burdened by large budget deficits.

The oil and gas industry has a long record of problem solving, overcoming technological challenges and surmounting logistical obstacles. Time and again, government intervention in the energy industry has proven a failure at worst and a miscarriage at best. George Mitchell, the inventive son of a Greek goat herder who developed the fracing process (he died last year at the age of 93) approached a problem–the low recovery rate of older wells–and found a solution. Following Mr. Mitchell’s example, let the industry create, implement and carry out a remedy. Public hysteria aside, issues involving runoff, spills, damaged boreholes and wastewater can be effectively managed and treated.

Other externalities, such as wear on roads by tanker trucks, the decreasing capacity of certain injection wells, the escape of fugitive emissions (mostly methane) and the presence of naturally occurring radioactive elements (“radionuclides”) do exist. But all such issues must be placed in correct context. Whatever problems that exist within the industry can, and should, be managed and solved by the industry. It goes without saying that there is enough capital, entrepreneurial spirit and technical know-how within the field to take on any such challenges.

Consider the following. The International Energy Agency (IEA) recommends that the industry move forward by increasing transparency about chemicals employed, monitoring wells more effectively, reducing methane emissions and managing water supplies more effectively. Implementing such measures, according to the IEA, would add approximately 7% to total well costs--a small price to pay in the face of potential increased state regulation, taxation and negative publicity.

And why is this approach so important?

When it comes to fracing, decisions are increasingly being relegated to the courts. Not only are issues of preemption gaining ground, but a growing number of property owners near oil and gas operations are filing state court claims against operators, for everything from negligence to liability and from trespass to nuisance. Much of this legal drama is in its earliest stages, but it is forcing the legal system, not the industry, to decide such key issues as causation, safety and subsurface trespass.

In short, the industry is abdicating political clout to its opponents.

The anti-fracing movement has a negative and distorting impact upon public policy. If disingenuous politicians seek to employ public prejudices and superstitions against the boogeyman of “Big Oil,” and if the industry does not adapt a coherent strategy to address problems real or imagined, then we are only inviting further government regulation in the oil patch. In the words of an old wildcatter, “If ya don’t want a person to come to your home, then don’t invite ’em to dinner.”


I. Books

Alex Prud’homme, Hydrofracking: What Everyone Needs to Know (Oxford, 2013).

Robert Bryce, Power Hungry: The Myths of Green Energy and the Real Fuels of the Future

(Public Affairs, 2011).

Steve Isser, The Economics and Politics of the United States Oil Industry, 1920-1990: Profits, Populism, and Petroleum (Routledge, 1996).

Robert L. Bradley, Jr., Oil, Gas and Government: The U.S. Experience [2 Vols] (Rowman & Littlefield Publishers, Ltd., 1996).

John Graves, Fracking: America’s Alternative Energy Revolution (Safe Harbor International Publishing, 2012).

Vikram Rao, Shale Gas: The Promise and the Peril (RTI Press, 2012).

II. Web Resources


“Colorado Election Results 2013,” DenverPost.com (Retrieved January 9, 2014).

“Colorado Oil & Gas Association Takes Legal Action Against Fort Collins, Lafayette Fracking Bans,” 9News.com (December 16, 2013).

Amy Harder, “Colorado’s Elections Were Fracked,” NationalJournal.com (November 6, 2013).

Andrew Harris, “Colorado Cities Sued Over Fracking Bans by Oil, Gas Group,” Bloomberg.com (December 4, 2013).

“Colorado Fracking: Should the State or Local Cities Control Where Oil and Gas Rigs Go?” Huffingtonpost.com (June 15, 2012).

“Typical Questions From the Public About Oil and Gas Development in Colorado,” oil-gas.state.co.us (Retrieved January 10, 2014).

Edward McAllister, “Colorado’s Fracking Bans Could Fall Before Courts,” Reuters.com (November 7, 2013).

Allison Sherry, “Polis, Hickenlooper Disagree on Colorado’s Fracking Regulations,” DenverPost.com (Retrieved January 10, 2014).

Colin C. Deihl and Ann E. Prouty, “Oil & Gas Regulation in Colorado: Developments During the 2013 Legislative Session,”faegrebd.com


Gary Wockner, “The Good, the Bad, and the Ugly in Colorado’s New Fracking Rules,” Huffingtonpost.com (January 2, 2014).

Doug Pike, “Lafayette Lawyers Up in Preperation for Fight with COGA,” dailycamera.com (January 7, 2014).

Brendan DeMelle, “Pittsburgh Bans Natural Gas Drilling Over Fracking Threat,” Huffingtonpost.com (January 9, 2014).

Katie Colaneri, “Ferlo Introduces ‘Open-Ended’ Fracking Moratorium Bill,” stateimpact.npr.org (September 18, 2013).

Laura Legere, “Chapter 78: A Guide to the Proposed Oil and Gas Regulations,” stateimpact.npr.org (January 7, 2014).



Bryan E. Loocke, “Pennsylvania Supreme Court Strikes Down Fracking Zoning Law: Governor Tom Corbett Contests the Ruling,” natlawreview.com (Retrieved January 10, 2014).

Sophia Pearson, Jef Feeley, and Mark Drajem, “Pennsylvania High Court Strikes down Part of Fracking Law, Bloomberg.com (December 20, 2013).

Selam Gebrekidan, “Pennsylvania Appeals State Supreme Court Ruling on Fracking Law,” Reuters.com (January2, 2014)

Theresa Nelson Ruck, “”What You Should Know About ‘Fracking’ in Ohio,” ohiobar.org (Retrieved January 10, 2014).

Julia P. Valentine, “EPA Releases Update on Ongoing Hydraulic Fracturing Study,” Yosemite.epa.gov (December 21, 2012).


“House Votes to Block Federal Fracking Rules,” thehill.com (November 20, 2013).

Adam Vann, Brandon J. Murrill, and Mary Tiemann, “Hydraulic Fracturing: Selected Legal Issues,” Congressional Research Service (crs.gov) (November 15, 2013).

“New System Offers Holistic Approach to Frack Water Treatment,” rigzone.com (May 2, 2013).

David Wethe and Peter Ward, “Fracking Bonanza Eludes Wastewater Recycling Investors,” Bloomberg.com (November 25, 2013).

“Colorado County and Municipal Law,” Intermountain Oil and Gas BMP Project, University of Colorado Law School, oilandgasbmps.org (Retrieved January 13, 2014).

Independent Oil and Gas Association of New York, “Critical Issues to the Oil and Gas Industry in New York State,” (January 11, 2012).

International Energy Agency, “International Energy Outlook 2012: Executive Summary,” iea.org (Retrieved January 15, 2014).

U.S. Energy Information Administration, “AEO2014: Early Release Overview,” eia.gov (Retrieved January 15, 2014).

U.S. Energy Information Administration, “International Energy Outlook: 2013,” eia.gov (July 25, 2013).

“Bowling Green City Council Passes Fracking Ban,” bgnews.com (September 16, 2013).

Joe Eaton, “Results Mixed on Colorado and Ohio Fracking Ban Initiatives,” Nationalgeographic.com (November 6, 2013).

“Can Local Ordinances Trump State Law on Fracking? Ohio Court Case to Decide,” vindy.com (December 1, 2013).

Chris Dolmetsch and David McLaughlin, “Anti-Fracking Laws in New York Towns Upheld on Appeal,” Bloomberg.com (May 2, 2013).


“Experts: Some Fracking Critics Use Bad Science,”pioga.org (July 23, 2012)

Kate Galbraith, “California Plans Tighter Control of Fracking, But Not Enough for Some,” nytimes.com (December 13, 2013)

Recent Anti-Fracing Legislation: A Sampling

Across the United States, over 250 communities have passed laws and resolutions to limit or prohibit fracing. Below is a small sample of recent legislation.

I. Colorado

In the November 2013 elections, voters approved the following:

*Larimer County: Fort Collins Ballot Issue 2A: Fort Collins voters approved, by a margin of 55.36% to 44.64%, to suspend fracing operations for five years.

*Boulder County: City of Boulder Question 2H: Boulder city residents approved, by a margin of 78.13% to 21.87%, the extension of a one-year moratorium on fracing into a five-year ban.

*Boulder County: City of Lafayette Question 300: Lafayette city residents approved, by a margin of 60.16% to 39.84%, a ban on all oil and gas extraction activities – including fracing.

*Broomfield County: Broomfield Question 300: The city and county of Broomfield approved, by a hair-splitting margin of 50.04% to 49.96%, a five-year ban on fracing (Figures that are still in dispute as of this writing).

*Colorado Fracing Ban Initiative: Led by a group calling itself Protect Our Colorado: If 86,105 signatures can be obtained, a proposal to ban fracing in the state will be placed on the November 2014 ballot.

II. Pennsylvania

*The Pittsburg City Council unanimously passed a ban on drilling operations.

*In 2012, Pennsylvania Gov. Tom Corbett signed into law Act 13, which prohibited municipalities from banning oil and gas development. In December 2013, the Pennsylvania Supreme Court upheld a lower court’s repeal, 4 to 2.

*September, 2013: State Senator Jim Ferlo (D-Pittsburg) introduced the Natural Gas Drilling Moratorium Act (S.B. 1100), placing a hold on new permits for fracing until an appointed commission can analyze the impact of fracing, tentatively scheduled for January, 2017.

III. Ohio

*City of Bowling Green: In September, 2013, the City Council voted 7-0 to ban fracing.

*Summit County: City of Munroe Falls. City has appealed a 2004 law giving the Ohio Department of Natural Resources exclusive authority over oil and gas well permits, location, and spacing.

*SB 213 & HB 345: Proposed bills that would halt drilling operations until the EPA completes a report on whether there is a link between fracing and contaminated drinking water.

IV. Michigan

*The ‘Committee to Ban Fracing in Michigan’ is leading an effort to introduce the ‘Michigan Fracking Ban Amendment’ on the November 2014 ballot.

V. New York

*Fracing is currently prohibited in over 50 New York communities, with dozens more either instituting moratoriums or outright bans.

*May, 2013: The New York Supreme Court upheld drilling bans in the towns of Dryden and Middlefield.

*June, 2012: The New York State Assembly extends the date on S5592, a 2011 law that placed a state moratorium on fracing until further environmental impact studies can be completed.

VI. Other States

*Vermont: In May, 2012, Gov. Peter Shumlin signed a bill banning fracing.

*California: Gov. Jerry Brown recently signed legislation established the outline for more stringent regulations on fracing, to take full effect in 2015.

VII: Overseas

*France and Bulgaria have banned fracing.

By Frank Harper, Fitzgerald Business & Management Consulting LLC

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