Ferguson Township Voters Approve “Environmental Bill of Rights”

Ferguson Township is a municipal place adjacent to State College, Pennsylvania. As of the 2010 US Census, it was home to 17,690 people.

Yesterday, voters there faced a ballot initiative calling for the municipality’s home rule charter to be amended to include “an environmental bill of rights.” Notably, the measure prohibits the extraction of natural gas and the installation of related infrastructure. According to a sample ballot, the measure read:

Shall the Ferguson Township Home Rule Charter be amended to add a Community Bill of Rights enumerating rights to pure water, clean air, rights of natural communities, a sustainable energy future, and local self-government, and to secure those rights by prohibiting corporations from extracting natural gas in Ferguson Township, from installing pipelines and compressor stations and from depositing, storing, or transporting waste water or other by-products of natural gas development within Ferguson Township?

This morning, the Centre Daily Times has reported that the measure was approved by a vote of 4,235 to 3,883. The group behind the ballot initiative is called Groundswell. The full text of the petition to amend the Ferguson Township Home Rule Charter is available at the Groundswell website. Last year the group succeeded in promoting a similar measure in State College Borough.

Fracking Patents Paper Accepted

A bit belated, but I am pleased to report that last month my paper with Dan Cahoy and Zhen Lei on Fracking Patents: The Emergence of Patents as Information Containment Tools in Shale Drilling was accepted for publication in the Michigan Telecommunications and Technology Law Review (MTTLR). According to the MTTLR website, its primary purpose is “to examine the tensions created by advances in computing, telecommunications, biotechnology, multimedia, networking, information and other technologies,” making it an especially good outlet for the paper.

In particular, the paper argues that patents can be used to control the creation of new information by limiting the evaluation of an invention by third parties. We argue that such control is more likely in situations where third-party use and assessment may produce information damaging to the patent owner, and show this is potentially the case in the context of natural gas extraction. Already, the paper has received a bit of attention — both as a top download at SSRN, and as the subject of an article in EnergyWire.

Energywire Covers Fracking Patents Paper

My working paper – Fracking Patents: The Emergence of Patents as Information Containment Tools in Shale Drilling – with Dan Cahoy and Zhen Lei was the subject of a recent story by Gayathri Vaidyanathan in Energywire, a publication of E&E Publishing.

HYDRAULIC FRACTURING: Flurry of patents could hinder chemical research, legal experts warn  (Monday, July 23, 2012)

Gayathri Vaidyanathan, E&E reporter

Companies that invent novel hydraulic fracturing chemicals or methods could use patents filed with the Patent and Trademark Office to stop scientists from studying the environmental and health impacts of the chemicals, some legal experts warn.

The situation has not yet occurred but needs to be on the government’s radar as a possibility, said Daniel Cahoy, associate professor of business law at Pennsylvania State University.

Since 2005, the patent office has issued an increasing number of patents related to fracking, a process in which pressurized water, sand and chemicals are injected into the earth to extract oil and gas. Most of these patents have been for chemical additives used in the fracturing process, such as gelling agents used to keep proppants suspended in water or nanochemicals that increase production.

Patents are meant to promote knowledge sharing by granting the patentee sole rights to an invention for some time, in exchange for revealing the details of the invention to the world.

But due to court decisions in the United States, patents also allow companies to stop unauthorized use of the invention by scientists for noncommercial purposes. This role of patents could be used to limit independent research into environmental and health effects, according to draft legal study, Cahoy said.

“Given that experimentation with some of the chemicals and methods used in hydraulic fracturing are necessary to understand the dangers, it is possible patents could be used as a means of controlling that information,” he said.

The issue highlights the controversy surrounding the secrecy in fracking. Companies often designate certain components in fracking fluids as “trade secrets,” which are different from patents because they hinge on complete secrecy. Industry says the secrets give companies a competitive edge in particular shales that are challenging to drill.

But the secret can be broken and details about the invention can become well-known. This is especially true as state governments such as Pennsylvania’s and Wyoming’s have exerted pressure on companies to reveal, confidentially to the government, their secrets. This increases the likelihood that secrecy could be challenged in court or that other ingredients in a recipe could be figured out. Once a secret is out, there can be no further safeguard against competition or unauthorized use; a company cannot have a trade secret and a patent for the same chemical.

“If you are the only one in your field that is doing something, and nobody is going to figure it out independently, you might as well keep it as a trade secret,” said Rochelle Dreyfuss, a professor at New York University School of Law. “But as the number of participants in the field starts to increase, the chances that somebody else is going to figure out what you figured out will increase, too, so at that point it might be worth getting patents.”

With the proliferation of drilling companies and greater governmental pressure to reveal fracking fluid recipes, even more patents could be filed in the future to protect against competition, said Cahoy. And those intellectual property rights can be enforced uniformly, against competitors and even scientists.

“As trade secrets become less viable as information disclosure is compelled [by government], patents become the only alternative or the better alternative,” he said.

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 The full paper is available for download from SSRN.

Paper on Fracking Patents a Top 10 Download

A few weeks ago, I posted my latest working paper – Fracking Patents: The Emergence of Patents as Information Containment Tools in Shale Drilling – on SSRN. Over the past few weeks, the paper has been a top ten download in the following categories.

Co-authored with Dan Cahoy, Associate Professor of Business Law at Penn State’s Smeal College of Business and Zhen Lei, Assistant Professor of Energy and Environmental Economics at Penn State’s College of Earth and Mineral Sciences, the paper argues that patents can be used to control the creation of new information by limiting the evaluation of an invention by third parties. We argue that such control is more likely in situations where third-party use and assessment may produce information damaging to the patent owner, and show this is potentially the case in the context of natural gas extraction.

Natural Gas and the State of the Union

In his latest State of the Union address, President Obama announced that:

We have a supply of natural gas that can last America nearly 100 years… The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy. And, by the way, it was public research dollars — over the course of 30 years — that helped develop the technologies to extract all this natural gas out of shale rock, reminding us that government support is critical in helping businesses get new energy ideas off the ground… Our experience with shale gas, our experience with natural gas, shows us that the payoffs on these public investments don’t always come right away. Some technologies don’t pan out; some companies fail. But I will not walk away from the promise of clean energy.

In addition to upsetting those concerned about the dangers of hydraulic fracturing, this part of his speech has also provoked criticism for “exaggerating” the role of the federal government in fostering the emergence of the natural gas boom.

For instance, a US News and World Report article entitled “Obama Exaggerates Role of Federal Government in Natural Gas Boom” by Daniel Kish, senior vice president for policy at the Institute for Energy Research, asserts:

The president’s claim that the federal government helped create the hydraulic fracturing boom is specious at best.

However, even a cursory look at the historical record reveals that the government’s role in oil and gas technologies generally and hydraulic fracturing related technologies specifically is far more involved and complex than acknowledged by Kish’s article. For instance, despite his claims to the contrary, the government played an important role at many points in the last 30 years, including in the case of Mitchell Energy. According to one recent article:

Mitchell Energy’s first horizontal well was subsidized by the federal government, according to former geologist and Vice President for Mitchell. “They did a hell of a lot of work,” said Steward, “and I can’t give them enough credit for that. DOE started it, and other people took the ball and ran with it. You cannot diminish DOE’s involvement.”

Rather than an isolated example, this vignette is indicative of the substantial role played by the government in a variety of oil and gas technologies, many related to hydraulic fracturing as it is now practiced. For instance, during the 1970s the Department of Energy invested more than $92 million in research related to the extraction of natural gas from shale reservoirs.

This is not to say that private organizations have not played an important role as well. My point is not to declare a winner between government agencies and private industry, but simply to note that any thoughtful consideration of the record will show that both private organizations and government agencies were significantly involved in the process over a large period of time. In actor-network terms, innovation implicates heterogeneous social and material actors, and is likely to result in hybrid forms of organizing. As a result, framing the problem up as either private innovation or government support are likely to be dead on arrival as a practical matter.

Further, on top of its direct involvement in technology research (such as through the Department of Energy), a reasonable accounting of the government’s role would also consider the role of tax incentives (without which operators such as Mitchell would have been unlikely to have drilled wells), the role of favorable regulations such as the Energy Policy Act of 2005 (without which operators would not be exempt from the liabilities of hydraulic fracturing), and the important role played by agencies such as the EIA and USGS in quantifying available reserves (without which operators would have difficulty raising the capital necessary for drilling).

In short, consistent with President Obama’s claims, and contrary to the assertions of US News and World Report, it is difficult to conceive of the oil and gas industry as we now know it without significant support and involvement by the US government.