NOFRAC Response to Paper 2: Economics

Response to Hydraulic Fracturing Review paper 2: Petrolelum Operations: Costs and Opportunities 

Paper does not provide economic analysis of risks and benefits, does not meet standards for an evidence-based review

The second Nova Scotia Hydraulic Fracturing Review paper Petroleum Operations: Costs and Opportunities (May 2014) (Paper 2) does not provide an economic analysis of the risks and benefits of HF in Nova Scotia, although this is what lead author Michael Gardner was appointed to do.[1] A full and objective assessment of costs, risks and benefits is required for informed decision making.  Instead of providing an evidence-based, balanced assessment, this paper is weighted towards unrealistic promotion of the benefits of developing unconventional gas, while minimizing risks and costs and providing misleading assertions.

  • In tone and content, this paper is strikingly different from, and in many places contradictory to, the detailed scientific analysis carried out by the Expert Panel on Harnessing Science and Technology to Understand the Environmental Impacts of Shale Gas Extraction, Council of Canadian Academies (CCA Expert Panel), May 2014. This paper ignores evidence from many peer-reviewed scientific articles and the CCA Expert Panel’s documentation of potential risks and costs arising from hydraulic fracturing for unconventional gas.
  • Paper 2 is strikingly unbalanced. It contains 12 pages detailing how industry activities are carried out and how they might benefit Nova Scotia. Much of this information is irrelevant or could be integrated into the primer. Following this detailed industrial information, we find a sketchy page and a half devoted to “community concerns.” The “community concerns” section does not provide a full, detailed assessment of risks to communities and their potential costs.

The paper outlines only five risks: all other costs and risks [documented in peer reviewed papers, by the Expert Panel, and other evidence] are simply omitted.

For example, economic risks to tourism, agriculture, wineries and other industries are ignored, as are risks to property values. These potential impacts on individuals and businesses, as well as municipal and provincial revenues are part of the economic picture. Economic costs to government or the public are also ignored, for example, there is no mention of the need for significant provincial investment in monitoring and enforcement should shale gas be permitted, nor to potential increases in health care costs, or legal costs of holding companies responsible if damages occur.

  • In contrast, the CCA Expert panel report states, for example, “Land impacts may include deforestation … and adverse effects on existing land uses such as agriculture and tourism.” The Expert Panel also notes “the cumulative effects of the large number of wells and related infrastructure required to develop the resource still impose substantial impacts on communities and ecosystems. … [and] require monitoring for potential fluid migration over long time scales to assess impacts.
  • Paper 2 places as much emphasis on discounting risks as it does to listing them. In the community section, risks are downgraded to “concerns,” described as “actual and perceived” and “concerns resulting from uncertainty about how HF works and the nature and security of safeguards in place, eg casing and cement.”.

Dismissing concerns about water contamination as misinformed or easily dealt with contradicts the CCA Expert Panel report, which notes:

◦     Natural gas leakage from improperly formed, damaged, or deteriorated cement seals is a long-recognized yet unresolved problem that continues to challenge engineers. Leaky wells due to improperly placed cement seals, damage from repeated fracturing treatments, or cement deterioration over time, have the potential to create pathways for contamination of groundwater resources and to increase GHG emissions (p. xiii);

◦     The greatest threat to groundwater is gas leakage from wells for which even existing best practices cannot assure long-term prevention (p. xiv); and

◦     Information concerning the impacts of leakage of natural gas from poor cement seals on fresh groundwater resources is insufficient. The nature and rate of cement deterioration are poorly understood and there is only minimal or misleading information available in the public domain (p. xvii).

This is just one example of a pattern of unsubstantiated assertions throughout the paper which imply that risks can be dealt with by simple measures (such as regulations or requirements for bonds to cover potential road damage). These assurances, like those about well integrity on page 4, contradict existing evidence.

  • The economic risks to communities presented in this paper do not reflect the broad amount of research that indicates costs to communities can be significant. The Canadian Council of Academies Expert Panel report notes the potential for “disruptive effects on communities and land; and adverse effects on human health.” We see no logical reason for including a full statement of potential economic benefits separate from a full statement of potential economic costs and risks, even given that those costs cannot be precisely quantified, and could be elaborated in future papers. That this paper does not even mention and acknowledge the legitimacy of potential costs and risks in full is not only an omission but a decision which reflects bias.
  • The financial benefits of offshore and unconventional gas are not comparable. The section noting how much financial benefit has come from the offshore should be omitted as a misleading comparison. Instead, information relating to the short life span of unconventional gas fields, few sweet spots, overall unprofitability of most wells, downgrading of supply estimates and minimal impacts on local community incomes should be included for a realistic assessment of potential benefits. For example, see Wall Street Journal, May 22, 2014.

Paper 2 does not meet standards for an evidence-based review to accurately assess economic impacts of hydraulic fracturing. The paper has significant, multiple problems in tone and content that cannot be corrected by minor changes to the present draft.  This paper should not be included in the final report. NOFRAC recommends that the panel start from scratch to develop a new paper providing an unbiased, evidence-based assessment of the economic risks and benefits of development of unconventional gas using hydraulic fracturing in Nova Scotia, as originally planned.

Nova Scotia Fracking Resource and Action Coalition, May 26, 2014

NOFRAC critique of HF paper 2 may 26

[1] See announcement of appointment December 6, 2013.

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