In a rare instance of honesty for one of the reprehensible political operatives in our nation's history, Karl Rove told a shale gas drilling association that "climate is gone."
"Climate is gone," said Rove, the keynote speaker on the opening day of a two-day shale-gas conference sponsored by Hart Energy Publishing L.L.P. And Rove told the trade show, "I don't think you need to worry" the new Congress will consider proposed legislation to put the controversial practice of hydraulic fracturing under federal rather than state regulation. The procedure, known as "fracking," is responsible for the dramatic growth of shale-gas drilling in formations such as Pennsylvania's vast Marcellus Shale.
He meant that the climate bill is dead, but the unfortunate reality is that livable climate for future generations is likely to be equally dead thanks to climate zombies elected in 2010.
It is ironic that Rove suggested that we will "return back to an era of sensible legislation." Rove's bluster obscures the fact that the "Halliburton exemption" for hydraulic fracturing has not been repealed. In case you are unfamiliar with the clever gambit by the Republicans to indemnify natural gas drilling operations from regulation, here is the background.
The only statute protecting groundwater is the Safe Drinking Water Act of 1974. This statute requires review and approval of all underground injection of fluids by industries. That statute is inconvenient to Halliburton (a major proprietor of fluids injected under high pressure during the "hydraulic fracturing" process to drill for natural gas in shale and coalbed formations). It would require that companies disclose the contents of those injection fluids to the EPA and risks rejection when toxic substances are included in the compound. Since the shale gas wells use horizontal drilling and high pressure fracturing of rock formations, there is considerable risk for contamination of groundwater supplies.
From the EPA:
Several statutes may be leveraged to protect water quality, but EPA’s central authority to protect drinking water is drawn from the Safe Drinking Water Act (SDWA). The protection of USDWs is focused in the Underground Injection Control (UIC) program, which regulates the subsurface emplacement of fluid. Congress provided for exclusions to UIC authority (SDWA § 1421(d)), however, with the most recent language added via the Energy Policy Act of 2005:
The Republican-fashioned Energy Policy Act of 2005 created an exemption to the Safe Drink Water Act for fluids injected underground as part of the hydraulic fracturing process. The exclusions listed in section 322 of the Energy Policy Act of 2005 include:
i) the underground injection of natural gas for purposes of storage; and
(ii) the underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities.”
Although the House conducted hearings in 2009 about hydraulic fracturing and there has been discussion of removing the Halliburton loophole, no action was taken. However, the House did authorize the EPA to conduct a formal study of hydraulic fracturing.
In its Fiscal Year 2010 budget report, the U.S. House of Representatives Appropriation Conference Committee identified the need for a focused study of this topic. EPA agrees with Congress that there are serious concerns from citizens and their representatives about hydraulic fracturing’s potential impact on drinking water, human health and the environment, which demands further study. EPA’s Office of Research and Development (ORD) will be conducting a scientific study to investigate the possible relationships between hydraulic fracturing and drinking water. EPA will use information from the study to identify potential risks associated with Hydraulic Fracturing to continue protecting America’s resources and communities.
This study is scheduled to begin in 2011 and have a report ready by 2012. No matter what the EPA finds, it is unlikely the contents will be made public nor will there be any attempt to repeal the Halliburton loophole. In fact, it is now highly likely that the new Congress will attempt to scuttle the EPA study altogether.
The other area of contention is that shale gas drilling operations are required to collect and treat wastewater generated by the drilling process that contains a glorious mixture of toxic compounds, salt from brine formations, and even uranium in some formations. The EPA has implemented minimum standards for conductivity for all discharges into surface waters as part of enforcement of the Clean Water Act. Drilling companies have a financial incentive to discharge wastewater illegally. Congress could create a new loophole to protect drilling companies from discharging wastewater either through weakened enforcement or meaningless penalties for violations.
Rove cannot go for more than a few minutes without a telling a lie. Here is one:
Rove lavished praise on the gas-drillers, who he said were bringing prosperity to parts of Pennsylvania.
Shale gas operations have not brought prosperity to Pennsylvania or any other state. That prosperity is a mirage.
Shale gas plays in the United States are commercial failures and shareholders in public exploration and production (E&P) companies are the losers. This conclusion falls out of a detailed evaluation of shale-dominated company financial statements and individual well decline curve analyses. Operators have maintained the illusion of success through production and reserve growth subsidized by debt with a corresponding destruction of shareholder equity.
Thanks to another loophole for the gas holes, investors in shale gas plays can be victimized by accounting tricks thanks to the Securities and Exchange Commission (SEC).
Recent revisions to SEC rules have allowed producers to book undeveloped reserves that questionably justify development costs based on their own projections in public filings. New reserves are being booked at the same time that billions of dollars in existing shale gas development costs are being written down because the projects are not commercial.
The profits exist only on paper because the costs are shuffled to another balance sheet.
Shale gas operators have consistently told investors that their projects are profitable at sub-$5/Mcf (thousand cubic feet) natural gas prices. Yet company 10-K SEC filings show that this is untrue. They have invented a new calculus of partial-cycle economics that excludes major capital draws for land costs, interest expense and overhead. They justify these disclosure practices because excluded costs are either sunk or fixed and, therefore, supposedly should not affect their decisions to drill. Their point-forward plans are made at shareholder expense since the dollars spent were very real at the time, and their costs cannot be charged to a profit center other than the wells that they drill and produce.
The taxpayers in states like Pennsylvania get almost nothing in return for all the mythical prosperity created by shale gas.
HARRISBURG -- For the foreseeable future, Pennsylvania will retain its dubious distinction as the only state with underground shale that doesn't impose a natural gas extraction tax.
An unhappy Gov. Ed Rendell admitted Thursday that despite weeks of talks, he and General Assembly leaders have failed to agree on key details of a gas severance tax, including how high the rate should be and how the $100 million or more in annual revenue from such a levy should be divvied up.
Democrat Rendell has had been pushing for enactment of a shale-gas tax since his 2010-11 state budget speech in February, but now says it "clearly is dead this year" -- and for a lot longer if Republican Tom Corbett is elected governor on Nov. 2, because he opposes such a tax.
Republican Tom Corbett won, the gas tax is dead along with environmental regulations in Pennsylvania.