Ask a trail guide: Should frackers pay to insure against spills?
New York has yet to lift its temporary moratorium on the most controversial method of natural gas drilling - horizontal hydraulic fracturing (or hydrofracking).
But if hydrofracking is eventually allowed here, how will the state make sure that drillers, not taxpayers, cover the costs of environmental cleanups?
One Innovation Trail user made the following suggestion:
We ought to require that drillers put up "environmental maintenance" bonds as insurance to pay for fixing anything that goes wrong with water supplies in the areas around their drilling. What we see in PA is that homeowners who've seen degradation of their well water are being squeezed by having to prove to an impossible standard that it is the drilling and only the drilling that's caused the poisoning of their water. Most do not have the financial resources to prove both that the drillers are the cause and that that there is no other possible cause. By anticipating such claims and putting up money upfront with a reasonable claims process we'll keep the trial lawyers out of it and make sure no one has to live with poisoned water. The drillers will say it's not needed. As we've seen in PA the deck is stacked against the homeowners if anything does go wrong. And if the drillers really don't cause any water quality degradation then they will eventually get their bond money back. It gives them extra incentive to prevent water contamination.
It's an interesting point, so we decided to use it for our "Ask a Trail Guide" series.
Question: Would "environmental maintenance" bonds be a way to hold drillers accountable for potential damage caused by hydrofracking?
Answer: Environmental groups in the Marcellus Shale say yes. In fact, drillers are already required to do this in New York and Pennsylvania. But environmentalists would still like to see higher bond amounts, plus bigger well-permitting and environmental impact fees.
Increase fees and bond requirements
Since 1985, New York has required drillers to put up between $2,500 and $5,000 per well to cover cleanup costs, but some say those amounts should be much higher.
David Gahl is the policy director for Environmental Advocates of New York, a government watchdog group. He'd like the bond amounts be in the neighborhood of $10,000 to $25,000 per well.
"Given the level of environmental concern ... we believe that a significant increase in the amount of bonds the drillers are required to put up is necessary," says Gahl.
He adds that permitting fees should also be increased in order to strengthen the regulatory power of the Department of Environmental Conservation.
"The permitting fees would hopefully help fund DEC staff [who] would be responsible for monitoring, for inspecting, for making sure that drilling companies are complying with state law," says Gahl.
New York's neighbor to the south
Pennsylvania is also home to a big piece of Marcellus Shale real estate, and right now lawmakers there are wrestling with how to handle gas drilling and its impacts on the environment.
At the state capital in Harrisburg, Jeff Schmidt heads the Sierra Club's PA chapter. He'd like to see a moratorium on Marcellus Shale drilling until the state can update its laws and regulations. Schmidt says Pennsylvania is currently the only major gas-producing state without a severance tax.
Right now there are about a dozen bills in Harrisburg that would enact either a severance tax or environmental impact fee on drillers, and Schmidt believes a measure will pass before the state budget is due on June 30th.
"Right now the way I read the tea leaves ... there is enough support between both Republicans and Democrats … that we'll get some kind of tax or fee legislation through," says Schmidt.
When it comes to bonds, Pennsylvania's Department of Environmental Protection's requirements date back 26 years, and are similar those in New York - $2,500 per well. But Schmidt says the regulations should be stricter, so drillers don't walk away from a mess.
"The rules have to be tight enough so that they realize what their responsibilities are going into it and enough bonds are set aside to pay for that," he says.