Latest Hydraulic Fracturing Headlines

U.S. Silica Holdings (NYSE: SLCA) reported second quarter profits of $19.5 million, triple the same period last year, driven by demand for proppants, which are used by the oil and gas industry during hydraulic fracturing. The company is the second largest producer of commercial silica in the United States, including its Ottawa White and Shale Frac branded proppants.

Canadian Pacific Railway formed a partnership with Smart Sand, another silica producer. Under the deal, CP Railway will ship drilling sand to areas hosting unconventional oil and gas plays in North America, including the Bakken and Marcellus Shale formations. BNSF Railway recently signed a similar deal with US Silica.

Meanwhile, the US Occupational Safety and Health Administration (OSHA) recently issued a hazard alert to employers engaging in hydraulic fracturing operations, requiring those employers to take adequate steps to protect workers from silica exposure. According to OSHA, “workers who breathe silica day after day are at greater risk of developing silicosis, a lung disease.” The National Institute of Occupational Safety and Health studied 11 fracking sites in five states and found that nearly 80 percent of all air samples taken showed exposure rates above federal recommendations.

One of the most commonly used hydraulic fracturing chemicals is guar. Verenium Corporation has obtained Environmental Protection Agency authorization to sell its next-generation cellulase enzyme for non-food applications, such as breaking down the guar-based gel used in hydraulic fracturing. The company estimates the addressable market in the U.S. for guar breakers in hydraulic fracturing is $250 million.

The Fort-Worth Star Telegram has a lengthy piece on Frac Tech Services (now FTS International). Founded in 2000, the company grew to more than $2 billion in annual revenue and 3,700 employees last year, making it one of the largest hydraulic fracturing companies in the world. PacWest estimates that fracking is a $30 billion industry in the United States.

The Wall Street Journal reports on a leaked memo from Nationwide Mutual Insurance Company indicating that it will not cover damage related to a gas drilling and hydraulic fracturing. According to the memo: “After months of research and discussion, we have determined that the exposures presented by hydraulic fracturing are too great to ignore…”

The University of Texas at Austin announced that it will conduct an investigation into a report issued by its Energy Institute which found no evidence that hydraulic fracturing contaminates groundwater. Contrary to University requirements, the Institute’s director and author of the report, Charles Groat, failed to disclose that he is director and stockholder of Houston-based Plains Exploration and Production Company, a company that engages in hydraulic fracturing. Groat’s shares are reportedly worth about $1.6 million, or nearly 10 times his annual salary as a professor.

A report from Earthworks concludes that the New York State Department of Environmental Conservation, the agency in charge of enforcing fracking regulations, has a staffing shortage and rarely inspects existing conventional gas wells. From 2001 to 2010, the number of annual inspections of oil and gas wells dropped by more than 1,000, the group found, while the number of wells increased by about 1,000 during the same period. Overall, it found that more than 75 percent of the state’s active oil and gas wells go uninspected each year.

In a recent New York Times op-ed, Jody Freeman, a Harvard law professor, writes that “Congress must lift the regulatory exemptions for hydraulic fracturing.” This would clear the way for a system of federal oversight that will promote confidence in hydraulic fracturing and provide the industry with uniform standards without overregulating it.

By contrast, the Petroleum Technology Alliance Canada (PTAC) recently published “The Modern Practices of Hydraulic Fracturing: A Focus on Canadian Resources.” The report concludes that existing Canadian provincial regulations are sufficient “to protect the environment, water and human health”

Congressional Committee Sizes

In today’s New York Times, Tom Friedman writes:

Our Congress today is a forum for legalized bribery. One consumer group using information from calculates that the financial services industry, including real estate, spent $2.3 billion on federal campaign contributions from 1990 to 2010, which was more than the health care, energy, defense, agriculture and transportation industries combined. Why are there 61 members on the House Committee on Financial Services? So many congressmen want to be in a position to sell votes to Wall Street.

What an interesting proposition: The size of a Congressional committee will be directly related to the availability of campaign contributions and lobbyists. Growing (shrinking) committees are related to increased (decreased) campaign contributions and lobbyists.

This same logic suggests that: The total number of committees and committee memberships will likewise be directly related to the availability of outside funding. As total spending on contributions and lobbyists goes up (down) the number of committees and committee memberships with increase (decrease).

To follow the money, simply follow the ebb and flow of Congressional committees over time. Taken together the propositions above suggest that Congress functions like a market, and not a ballot box.

Numbering the Discontent

The graphic accompanying a recent New York Times article seems to capture in numbers the sentiments so many have been trying to express lately. Among 31 OECD countries ranked on social justice, the United States is among the bottom 5 overall (just ahead of Greece, Chile, Mexico and Turkey), and in the bottom 5 or 10 countries on 7 out of the 8 indicators ranked. For those of us who were (a) once children, (b) enjoy remaining healthy, or (c) hope to grow old someday, the news is a sobering reality check.


Strategic Social Responsibility

Some interesting sound bites in a recent New York Times article on a large desalination project in China. Although the $4 billion Beijiang Power and Desalination Plant is “a technical marvel,” “the desalted water costs twice as much to produce as it sells for.”

“Someone has to lose money,” Guo Qigang, the plant’s general manager, said in a recent interview. “We’re a state-owned corporation, and it’s our social responsibility.” In some places, this would be economic lunacy. In China, it is economic strategy.

For more in-depth coverage, see Water World’s report on the Chinese desalination market.

Charting the Debt

The New York Times has a nice set of infographics charting the history of the U.S. debt crisis. Of the $14.3 trillion debt, all but $1 trillion has been accumulated during the Reagan, G. H. W. Bush, Clinton, G. W. Bush and Obama presidencies. Democratic presidents were in office during $3.8 trillion of deficit accumulation, compared to $9.5 trillion of deficit accumulation during republican presidencies.

Recycled Wastewater

Hydraulic fracturing consumes million of gallons per well. Recently, much has been made of the recycling of the “produced water” (aka, toxic waste). Turns out, far less wastewater is being recycled than originally reported.

From 57% to 17% recycled

From 57% to 17% recycled

Hydraulic Fracturing and Marcellus Shale

Yesterday, hydraulic fracturing and Marcellus shale were front page news — both locally and nationally.

The top story in the Centre Daily Times was “Forest Leases Under Fire.” Already, the Commonwealth of Pennsylvania has issued leases to gas companies for nearly half of its 1.5 million acres of state forest. At issue are concerns that current Governor Tom Corbett will over turn a moratorium enacted by outgoing Governor Ed Rendell. According to a study by the Department of Conservation and Natural Resources (DCNR) there remain “zero state forest land acres suitable for gas leasing involving surface disturbance.”

In an interesting twist, the article reported that further development would threaten the sustainability certification of Pennsylvania’s forests. In particular, the Forest Stewardship Council (FSC) has certified that the Commonwealth’s state forest operations are sustainable, based on factors including a 2 percent rate of conversion of forests over any five-year span. However, even without further leasing, several state forests are projected to lose more than 2% of their acreage to conversion by 2020, jeopardizing their certification. Some 35 wood-industry related companies have attained FSC certification for adopting sustainable practices in Pennsylvania, which they use as a selling point for their products. They stand to forfeit their certification if their harvests come from forests deemed to be losing acreage unsustainably. An expansion of drilling in state forests — as Corbett has suggested — would exacerbate the problem.

In another front page story, the New York Times continued its Drilling Down series which examines the risks of natural-gas drilling and efforts to regulate this rapidly growing industry. The latest installment announced “Wastewater Recycling No Cure-All in Gas Process.” Lately, the oil and gas industry has been touting innovations in wastewater recycling. But apparently the rhetoric and reality don’t match up. In Pennsylvania, for example, natural gas companies recycled less than half of the wastewater they produced during the 18 months that ended in December, according to state records.

According to Brent Halldorson, chief operating officer of Aqua-Pure/Fountain Quail Water Management, a drilling wastewater recycling company: “No one wants to admit it, but at some point, even with reuse of this water, you have to confront the disposal question.” He added that the wastewater contains barium, strontium and radioactive elements that need to be removed.

Data posted by the commonwealth on Tuesday, show that operators produced more than 680 million gallons of wastewater in the year and a half that ended in December 2010. Of this amount, well operators reported recycling at least 320 million gallons. At least 260 million gallons of wastewater were sent to plants that discharge their treated waste into rivers. Another 50 million gallons or more of wastewater is unaccounted for, according to state records.

Grade Inflation or Resignification?

Recently a colleague drew my attention to a New York Times article on college grading. The article begins by asking: “if everybody in the class gets an A, what does an A mean?”

Exhibit A in the article is Andrew Perrin, a sociologist at the University of North Carolina (UNC), who is “working to fight grade inflation.” In his opinion, “An A should mean outstanding work; it should not be the default grade.” By comparison, average college grade point averages (GPAs) have been rising for decades. At UNC, for instance, the average GPA has climbed from 2.49 in 1967 to 2.99 in 1999 to 3.21 in 2008.

A committee that Professor Perrin leads is working with the UNC registrar “to add extra information — probably median grades, and perhaps more — to transcripts.” Reflecting on their progress, Professor Perrin notes: “It’s going to be modest and nowhere near enough to correct the problems… But it’s our judgment that it’s the best we can do now.”

The irony of this comment is hard to escape. Apparently, even someone for whom an A is a mark of excellence finds it necessary in practice to proceed on the basis of work that falls far short of that standard. In other words, sometimes good enough — or even mediocre work — may be the best possible outcome. It also highlights how evaluation is perhaps best left internal to those engaged in the work itself.

By comparison, when subjected to external evaluation, clashes are likely. For instance, I wonder how Professor Perrin would feel if his Dean gave him a C (or gasp, even a D or F) for his efforts come annual review time? Or should he instead get an A, in consideration of the efforts he made on this difficult subject?

Although I can sympathize with the problem — a clash over evaluative standards — for me it is not clear that some kind of “deflation” or “revaluation” is the antidote. And these tensions are at the heart of my ambivalence over whether “grade inflation” is a problem worth worrying about, at least as currently framed. In the real world — ie, in practice — collective outcomes are never simply the aggregates of individual efforts. A team of A students or B students or C students may or may not accomplish great things, but regardless, it will have little (perhaps nothing) to do with their college grades.

This approach — of providing “extra information” — is problematic for me on a second level. Conceiving of grades as some kind of “information” space, misses out on what may be the root problem, namely one of meaning. If my premise is correct, then the crisis is not one of grade inflation but of grade signification. What do grades signify? In what ways are they meaningful? Are they a mark of adequacy? Exceptionalism? Anachronism? No amount of extra information can answer these questions. Perhaps the time for grading has even come and gone in some situations? For instance, in the context of a class like business ethics, the idea that “I” might grade “you” is anathema to fostering ethical discourse. And yet, universities require that grades must be given.

In a world of one best way, perhaps grades were useful. But in a world where the destination is in the making even as the journey unfolds, what counts? Indeed, what might a “post-grading” grading scheme look like?

Prop 23 and Out of State Interests

Thomas Friedman’s latest column on “The Terminator vs. Big Oil” adds another dimension to the rampant campaign finance conflicts of interest inherent in our political system.

In particular, Friedman shines a spotlight on California Prop 23, which “proposes to suspend implementation of A.B. 32 until California achieves four consecutive quarters of unemployment below 5.5 percent. It is currently above 12 percent.” A.B. 32, or California’s Global Warming Solutions Act of 2006, was designed to put California on a path to reducing greenhouse gases in its air to 1990 levels by 2020, and at the time it was enacted had the support “of Republicans, Democrats, businesses and environmentalists.”

But now, according to Governor Schwarzenegger, speaking at an energy forum last week in Sacramento:

“It is very clear that the oil companies from outside the state that are trying to take out A.B. 32, and trying to take out our environmental laws, have no interest in suspending it, but just to get rid of it… They want to kill A.B. 32. Otherwise they wouldn’t put this provision in there about the 5.5 percent unemployment rate. It’s very rare that California in the last 40 years had an unemployment rate of below 5.5 percent for four consecutive quarters. They’re not interested in our environment; they are only interested in greed and filling their pockets with more money… And they are very deceptive when they say they want to go and create more jobs in California… Since when has [an] oil company ever been interested in jobs? Let’s be honest. If they really are interested in jobs, they would want to protect A.B. 32, because actually it’s green technology that is creating the most jobs right now in California, 10 times more than any other sector.”

In particular, Texas oil companies Valero and Tesoro “have led the charge against the landmark climate law, along with Koch Industries, the giant oil conglomerate owned by right-wing megafunders Charles and David Koch. Koch recently donated $1 million to the effort and has been supporting front groups involved in the campaign.”

For me, this raises some interesting questions. At the federal level, foreign interests are technically prohibited from making political contributions (although there is reason to suspect they are being circumvented and not adequately enforced). Why don’t states adopt similar regulations with regard to out of state interests — corporate or otherwise? After all, why should the citizens of a state be held hostage to outside interests of any kind? It seems that residents of a state should have more say over their own governance than a couple of businesses who happen to have facilities located there. Of course, the same goes for other activists.

Global Renewable Energy Map

I stumbled across this information graphic today. It provides a nice summary of the different paths to ending dependence on fossil fuels being pursued around the world. It might be interesting to study whether or not non-fossil fuel usage will emerge as a leading indicator of other good things — from economic to quality of life.