Oil and Gas Well Facility Siting

This week I’ll be giving an invited talk to the University of Alberta’s Department of Resource Economics and Environmental Sociology (REES) in the Faculty of Agriculture, Life & Environmental Sciences (ALES). The talk will be on Thursday, March 20 at 3:30 pm in 550 General Services Building. For more details, visit the REES Seminars and Lectures website. The title of my talk is: “Community Vulnerability and Facility Siting: The Case of Marcellus Shale Gas Drilling, 2004-2012.” This work is joint with Dror Etzion of McGill University.

Abstract: Hydraulic fracturing (“fracking”) has rapidly emerged as an ubiquitous technology for extracting oil and gas from previously inaccessible geological formations. Due to the nature of the technology and its relatively small surface footprint, wells can be sited virtually anywhere, including in close proximity to homes, schools and other sensitive locations. With many uncertainties about the technology still unresolved, critics point to the potential for unequally distributed negative health outcomes among those in regular proximity to drilling sites. Accordingly, for oil and gas companies, deciding upon well sites can be a contentious activity, incorporating not only economic and geological factors but social and community ones as well. In this study, we examine all hydraulically fractured wells in the Marcellus shale play from 2004-2012 in the state of Pennsylvania and assess whether community vulnerabilities played a role in well siting decisions. We find that indicators of socio-demographics, social cohesion and municipal governance are predictors of well siting decisions, beyond the traditional attributes of race and income usually highlighted in the environmental justice literature. Our findings suggest that research on community health should not be limited to phenomena like nuclear power plants and hazardous waste facilities, but should expand to include routine, commonplace and autonomous organizational siting decisions characterized by minimal regulatory involvement.

We are scheduled to present subsequent iterations of this research at the Alliance for Research on Corporate Sustainability, in May 2014 at Cornell University, and again at the Academy of Management Annual Meeting, in August 2014 in Philadelphia.

Marcellus Shale Drilling Talk

This week I was invited to give a talk to the University of Alberta’s Department of Resource Economics and Environmental Sociology (REES) in the Faculty of Agriculture, Life & Environmental Sciences (ALES), and I am really looking forward to it. The talk is scheduled for March. I’ll be presenting research related to Marcellus Shale Drilling that I have been working on with Dror Etzion from McGill University.

For more details, check back here, or visit the REES Seminars and Lectures website: http://www.rees.ualberta.ca/SeminarsandLectures.aspx

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.

article continues at Energywire (login required)

 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.

Fracking Patents Working Paper Available

My latest working paper — Fracking Patents: The Emergence of Patents as Information Containment Tools in Shale Drilling — is now available on SSRN.

The paper is a collaboration 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.

In general, patents are viewed as a positive force, providing a vehicle for disseminating information in exchange for a limited property right over an invention. However, we make an alternative claim: patents can also 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. In particular, we explore the relationship between patents and information control in the context of natural gas extraction.

We show that substantial growth of patents in hydraulic fracturing, the technology used to extract gas from the widely discussed Marcellus Shale in the eastern United States, occurs simultaneous with the emergence of related concerns. In light of this insight, we explain how patents on hydraulic fracturing fluids could potentially be used to prevent testing by third parties. Analogies in agricultural biotech and genetic treatments are used to support these claims.

An understanding of the role of patents as information control mechanisms is critical to the safe employment of new technology. If patents substantially limit information creation or disclosure, government intervention to permit experimental use and environmental, health and safety testing may be necessary. However, options do exist under current law that should be considered before patent rights are encumbered.