Bouncy music and colouring book graphics introduce “A Look Underground,” a short video uploaded to YouTube last year by the Calgary-based Encana Corporation “to educate children about natural gas development.” In the demonstration, engineer Mark Taylor explains the principles of hydraulically fracturing shale and recovering natural gas to a dozen kids ranging from toddlers to preteens. The children stand gathered around a structure built from cupcakes arranged in a horseshoe, its top iced a vivid green and decorated with plastic trees and farm animals. A thick layer of white icing represents the shale layer below. Taylor shows how drillers push steel pipe down deep through the chocolate “earth” to the coveted shale, an operation depicted with plastic tubing. Next, he says, “we basically load it up with explosive charges like big firecrackers, and we blast holes into spots all along the way, so the gas can come out of the white shale here and into our well.”
It’s not a bad description of the process that has transformed North America’s fuel forecast and global energy politics within the lifetime of Taylor’s audience. And the subtext is one the gas industry hopes consumers will easily digest: that unconventional natural gas is as wholesome and safe as kindergarten. The hydraulic fracturing the video describes, also known as hydro-fracking, or simply fracking, is the sine qua non of the new gas, the key that has unlocked massive supplies of fossil energy once thought to be out of reach. Conventional gas sits in discrete underground pools; all it takes to get at it is to stick a straw down into the right place. But geologists have long known that much more natural gas remains sequestered in the minute pockets between the grains of certain types of rock. In most cases, fracking uses water with additives to shatter the rock, creating fissures that enable the gas to flow into a well.
First used to access gas in the American and Canadian West, where the process has been used on tens of thousands of wells, fracking has made a growing number of unconventional gas beds viable for recovery. Formations rich in gas micro-pores are strung in a patchy U across North America, beginning in British Columbia’s far northeast; trailing down the eastern slope of the Rocky Mountains (with significant stores through Alberta, Saskatchewan, and North Dakota); and then sweeping across the southern US to a long band of gas-bearing shale that runs under half a dozen eastern states and up into Canada. The last in particular—the Marcellus Shale, which lies tantalizingly close to the energy-hungry markets of the eastern seaboard—has the industry salivating. Based on usage today, according to the Canadian Society for Unconventional Gas, Canada has enough frackable gas to maintain current production for about a hundred years.
Fracking has altered North America’s fuel supply so explosively that a gas bubble has saturated the market, driving down prices in recent quarters. Simultaneously, however, estimates of the abundance of unconventional gas have rescued producers from inevitable eclipse as conventional production declines. Instead, the industry has embraced a bold new ambition: to position gas as the economy’s energy mainstay, a fossil fuel as cheap and plentiful as coal, only cleaner and greener. Environmentalists, meanwhile, link fracking to a host of injuries to water, air, humans and wildlife, and to the integrity of ecosystems. France has banned the practice, and the European Union is toying with similar prohibitions.
Industrialized humanity exhausts more than 500 exajoules of energy each year, for every purpose from growing food to opening the door. That’s roughly the equivalent of setting off a Hiroshima-sized bomb every five seconds. In Canada, gas supplies more than one-quarter of the energy we use (I heated my shower with it this morning) but barely half the amount we extract from coal and oil—sources that environmentalists deplore even more than frack gas. And as much as we might like to see those sources replaced by renewable energy, that also comes with limits and costs.
The story of fracking, then, is a story about risk, about those unavoidable contingencies we face and trade off every day as individuals and communities, weighing our wants (income, a warm home, a good Christmas sales season) against the effort, cost, or hazards of getting it: a collision on the commute, a dammed-up river somewhere, a slightly warmer climate. Rarely is the answer kindergarten-simple.
East of Calgary, the snow-dusted prairie is the white of the December sky. Dropping into a coulee, the bare two-lane blacktop turns sharply right at the hamlet of Rosebud, and I follow a side street buried under fresh snow before circling to a dead end in front of Jessica Ernst’s house. A shy environmental biologist with long, straight, greying hair, she ushers me in and offers me hand-knitted socks to ward off the floor’s chill. Her living room and kitchen are cluttered with the artifacts of daily life: house keys, small tools, correspondence—lots of correspondence. Several walls hold examples of her one financial indulgence, art. Prominent are works by Marianna Gartner, a Vancouver artist who sets disturbing portraits of pale children—some with tattoos, or skulls for heads—in surreal landscapes that might be dreams or nightmares.
Ernst’s reality has been mostly the latter since early 2005, when she began to suspect something was wrong with her plumbing. Her bathtub faucet whistled loudly, as though air were being forced out of it. Small black grains clogged her kitchen tap. The water in her toilet fizzed as if it were full of Alka-Seltzer. She developed a skin rash so severe that her doctor compared it to industrial burns. In a touch out of Stephen King, her dogs backed away from their water dishes.
Ernst has worked in the oil patch for decades, mainly advising companies on how to lighten their impact on the communities where they operate. She knew that Encana, one of North America’s largest unconventional gas producers, with operations in the US, BC, and Alberta, had been drilling in a coalfield beneath the nearby hills, known as the Horseshoe Canyon Formation. She also knew that her own water well, which had run clean and pure since 1986, drew on parts of that same formation. She conducted a simple test, running tap water into a mug, then lighting a match and waving it beside the lip. A yellow-orange flame spread across the water. For her next homespun experiment, she partly filled a plastic pop bottle with water and tightened the cap. A minute later, holding a lit match near the bottle’s neck, she unscrewed the cap. The bottle exploded, shooting a blue flame like a rocket.
Formal testing identified the mystery fizz in Ernst’s water as methane, with traces of petroleum distillates, BEHP (a possible carcinogen), and heavy metals—all linked to oil and gas activity. At airborne concentrations of between 5 and 15 percent, methane can explode, and in the fall of 2005 she borrowed a methane detector. After the second alarm indicating that gas was building to unsafe levels in her home, she disconnected her well. Two large tanks in the basement now hold water trucked in from Drumheller, twenty-five kilometres away.
Like most Albertans, Ernst has almost no say over gas development adjacent to, beneath, or even directly on her twenty hectares of prairie. In common with most of western Canada and many other parts of the country, title to surface real estate in Alberta generally doesn’t include the gas beneath it. Instead, with some exceptions, that belongs to the Crown, in its provincial or federal capacities. Government owns the gas, sells rights to access the gas, banks the cheque, and deploys its legal weight to guarantee that the companies get what they pay for. Drillers must indemnify landowners for inconvenience caused while accessing their properties, but the owners cannot turn them away. Those who feel under-compensated can take up their cases with a government arbitration board. Everyone else is on his or her own.
Ernst is not the only Alberta resident to protest this arrangement. The libertarian Wildrose Party campaigns on changing the law to restore Albertans’ property rights. Groups such as Water Matters and the Pembina Institute have raised environmental concerns about fracking. But no one is as consumed by the issue as Ernst is. Describing herself as “a business person who’s doing what’s right” rather than as an activist, she writes letters to regulators and elected leaders, circulates fracking news to contacts as far away as India, and has testified before a parliamentary committee studying the environment. This past spring, she made a presentation to the United Nations Commission on Sustainable Development in New York.
Her tenacity has cost her. Consulting jobs have all but dried up. One rancher I spoke with declined to be quoted for this article, for fear of being publicly discredited, “like that ‘crazy’ lady in Rosebud.” She has also been called a Canadian Erin Brockovich, the whistle-blower portrayed by Julia Roberts in the 2000 biopic. But compensation for her ruined well has eluded her, along with the admission of responsibility she feels is warranted. Her lawyers have filed suit in the Court of Queen’s Bench of Alberta, seeking more than $30 million in restitution and damages from Encana, the Energy Resources Conservation Board (an independent, quasi-judicial agency of the Alberta government), and the provincial Crown. (Encana declined to comment on a case before the courts; at press time, neither the company nor the province had filed statements of defence.)
With her feet tucked under her for warmth, Ernst cradles a mug of tea. “I fell in love with Alberta,” she says softly. “I fell in love with that fierce independence.” But the way the provincial government and the gas industry roll over Alberta’s citizens, she says, has been traumatic: “I see this as domestic violence. Albertans are being raped.”
Two stories circulate about the practice that has liberated unconventional gas from its rocky pores. Neither is quite true. One extols a game changer, a seismic shift for energy supply and the climate. New methods, this meme tells us, have liberated a wealth of energy so vast, so cheap, and so convenient that ExxonMobil Chemical president Stephen Pryor predicted that by 2030 natural gas will supplant coal as the world’s second-largest fuel source, after oil. Its selling features include an established distribution network, consumer familiarity, and round-the-clock availability. “Versatile,” “reliable,” “affordable,” “abundant”: these evocative adjectives beam across the Canadian Gas Association’s elegant website, where gas is described as “a foundation of Canada’s clean energy future,” with “low greenhouse gas emissions.” This last claim is the industry’s key argument for putting gas at the heart of the economy, as a “transitional fuel” to carry North America from reliance on coal and oil to a shimmering future powered by renewable energy. One more thing Canada’s gas producers want you to know: this bounty of cheap green fuel is “safe energy, safely delivered.”
It’s an oft-repeated industry assertion. According to Janet Annesley, vice-president of communications at the Canadian Association of Petroleum Producers (CAPP), 167,000 wells have been fracked in Alberta since the method was introduced there, and yet “there has never been a documented case of groundwater being contaminated, not a single one.”
Security of supply constitutes another part of the industry’s strategic sell. Local gas, the claim goes, will reduce energy dependence on unfriendly foreign regimes. The prospect of home-tapped gas appeals to small and vulnerable countries such as Poland (where fracked gas slated to flow next year may free Poles from reliance on Russia, a serial invader, as an alternative to coal) as much as it interests developing giants. Che Changbo, a senior energy adviser to the Chinese government, told Bloomberg News, “Once we start large-scale production, shale gas won’t be an unconventional fuel for China anymore, and it will play an important role to supply China’s energy needs.” The country’s frackable reserves are estimated at twelve times what it possesses in conventional gas.
Then there’s the money. Encana, for example, pocketed $1.5 billion in profit last year on $9 billion of revenue. The industry also boosts the broader economy: in 2007, roughly $12.7 billion flowed into Alberta and $2.9 billion into British Columbia to lease trucks, buy steel, and employ wildlife biologists and derrick hands. Between 2005 and 2010, the BC government cashed $5.4 billion worth of industry payments for leases to drill the Horn River and Montney areas in the province’s northeastern corner; royalties from gas production added more revenue. Last spring, with so many nations flirting with fracking, the International Energy Agency gushed that the global economy may be entering a golden age of gas.
Environmental groups such as Canada’s David Suzuki Foundation and the Worldwatch Institute in the US, countless blogs devoted to excoriating big oil, and Gasland (an Emmy-winning documentary by filmmaker Josh Fox) tell a very different story. In it, gas companies are rapacious invaders of landscapes whose operations suck up water by the streamful, disrupt rural peace, pollute the air, unsettle subsurface geology to the point of triggering earthquakes, introduce poisonous compounds and explosive gases into ground- and tap water, and produce enormous volumes of toxic waste water. All without appreciably reducing greenhouse emissions, and possibly even adding to them. A Council of Canadians fact sheet titled “No Fracking Way!” states that “any energy resource that sacrifices water protection and threatens people’s health and environmental safety in such significant ways should be halted.”
Governments in Britain, Australia, New Brunswick, and Saskatchewan have given fracking the green light, at least in principle. Meanwhile, New Jersey’s state legislature joined France in banning the method, although its decision was later vetoed by Governor Chris Christie. Quebec put fracking on hold, pending study. And while the US Environmental Protection Agency is still researching the issue, an expert panel assembled by the US energy secretary, Steven Chu, concluded last August that “there are serious environmental impacts underlying these concerns.” Unless industry addresses those impacts, the experts added, “public opposition [to fracking] will grow, thus putting production at risk.”
The truth about the environmental cost of fracking, as you might guess, lies somewhere between these two poles. Unconventional gas is useful, but it can also produce significant damage. Fracking was first used commercially in Texas and Oklahoma in the wake of World War II by roughnecks who pumped jellied gasoline—better known as napalm—into oil wells to loosen the rock and improve the flow of crude. Licensing rights to the practice were snapped up by an enterprising oil field engineer named Erle Halliburton. His company (yes, that Halliburton) already supplied cement and related equipment to oil drillers, who use them to secure wellheads. With that expertise complemented by a new approach for stimulating the flow of money-making crude (treated wells could produce 75 percent more oil than untreated ones), Halliburton’s business boomed. Today it operates in more than eighty countries, and in July it reported a $739-million profit on second-quarter revenues of over $5.9 billion.
Other companies now offer fracking services, among them global oil field giant Schlumberger. Directional drilling, in wide use since the 1980s, enables engineers to turn a well bore ninety degrees and extend it for kilometres through horizontal shale, exposing much more of it to fracking. But the essence of the task remains unchanged: use a hydraulic hammer to shatter stone. The hammer, however, has bulked up by orders of magnitude. The first commercial fracks used the equivalent of a seventy-five-horsepower outboard motor to force 180 kilograms of sand, slurried in 2,800 litres of frack fluid, down a well—once, or at most twice. Modern fracking can take the power of several diesel locomotives to drive anywhere from 220,000 to 3.7 million litres of water and fracking fluid underground, each time forcing up to 2.2 million kilograms of sand or another “proppant” (a material to keep the resulting fractures open afterward) into the fissures. Now, instead of just one or two fracks, most wells undergo a dozen or more over a period of months; some take up to fifty individual fracks.
Napalm no longer seems to be the frackant of choice, although this is difficult to ascertain, because frack constituents have been closely guarded in Canada and in most American states. Much of what is pumped down most wells—over 99 percent in many cases—is water. Not all of it is fresh: some operators inject non-potable brine; and Shell Canada recently paid $9.75 million for treated sewage water from Dawson Creek, BC, for its fracking operations in the region. The remainder is a complex cocktail that varies from well to well, depending on the provider and the local geology. Some ingredients, such as tallow soap and crushed nutshells, are benign. Others are pure poison. Diesel fuel has been a common additive, although some companies have sworn off it. A 2011 US congressional study examined some 2,500 frack formulas, and reported that it had found more than 650 ingredients listed as possible carcinogens, air pollution hazards, or regulated compounds under the US Safe Drinking Water Act.
Blame Halliburton for helping to keep this information a secret for so long. In 1995, the company recruited a consummate Washington insider as its new CEO. His name was Dick Cheney. Five years later, Cheney left the company to join former oil executive George W. Bush on the Republican ticket for the presidency. In his second week in office, President Bush assigned Cheney to craft a new energy policy. The 2005 energy bill that emerged contained, among other features, a plum for the fracking industry: a unique exemption from the US Safe Drinking Water Act’s prohibition on injecting any substance underground that might endanger potable groundwater. Canadian regulators fell into line: none insisted on knowing what proprietary fracking cocktails contained. Under mounting pressure, and amid a wave of state-level concessions to greater disclosure in the United States, where even Texas now requires it (and Halliburton provides it), Alberta and British Columbia claim to be working through technical challenges with the aim of publicly releasing the details of frack fluid contents in their jurisdictions. CAPP announced in September that it “will support the disclosure of fracturing fluid additives.”
The possibility that a hard fracking could allow gas or fluid to migrate through the ground is not remote; it’s the point. “If you enhance the permeability of the rock mass, which is the purpose of hydro-fracking,” explains Diana Allen, a groundwater scientist at Simon Fraser University in BC, “it expands existing fractures and opens up new ones. So if you put something into the ground, it’s going to go somewhere else.” Yet CAPP’s Janet Annesley may be right when she insists that no case has ever proven that fluids released during a frack have contaminated groundwater. The industry’s explanation is that most fracking (although not that in Rosebud) occurs thousands of metres underground, sealing the fluids beneath multiple layers of rock. Of course, proving a link between chemicals in a well and chemicals in fracking fluid is made harder when the latter are kept secret. But in any case, frack fluid leaking deep in a drill hole may be the least of the ways the new gas boom makes itself felt. Much greater risks are posed by drilling activity above ground and just beneath it—in the shallow zone where Jessica Ernst’s suit alleges that methane migrated from Encana’s well and into hers.
The drilling enterprise represents a phenomenal accomplishment. Men (almost exclusively) and their machines force a spinning, half-metre-thick column of steel two kilometres straight down through solid rock, then turn it sideways and, guided by the shadowy squiggles of seismic printouts and downhole instruments as sophisticated as anything aboard the International Space Station, push it along for hundreds or even thousands of metres more. Steel and cement seal the hole where the bit entered the earth, and fracking starts. Diesel engines run continuously. Tank trucks haul in the liquids required, from water to drilling mud, making hundreds of round trips for a typical well. When the hole has been adequately “stimulated,” the injected water will come back up, laced with frack fluid, mud, and ground-up rock. All of it is toxic and must be contained until it can be treated or disposed of in deep wells. Later, when the drilling and fracking equipment has moved on, other machinery will remain, rumbling twenty-four hours a day to push the gas down a pipeline to consumers.
At every stage of this enterprise, something can go wrong. And it has:
In 2010 in Pennsylvania, poor drilling pressure control caused a well to blow out, spewing gas and frack fluid over a state forest for sixteen hours.
In Ohio, faulty cementing of the uneven gap between a steel well casing and the exposed rock of a drill hole allowed gas to leak out of a well into an underground source of drinking water. A residential basement exploded in 2007 (no one was hurt).
Frack contamination of water wells may not be documented, but in early 2010 the BC Oil and Gas Commission reported a large kick (a sudden rise in back pressure) at a well that “communicated” frack sand to a second well two-thirds of a kilometre away.
While the industry acknowledges that frack flowback (the excess liquid pushed out of a well at the end of the process) is toxic, it emphasizes that it dilutes frack concentrates in water. But when a US Forest Service researcher spread flowback waste over an experimental forest plot in West Virginia, all of the ground foliage died within two days. Over the next two years, more than half of the trees on the plot also succumbed.
In western Colorado, frack waste leaking from a holding pond poisoned an outfitter after he drank water from a nearby spring. In 2010, Pennsylvania documented 130 cases of waste water spilled into its streams over the previous two years.
Since 2009, more than thirty earthquakes have been registered in the Horn River area of BC, where there has been extensive fracking activity.
Most of those incidents were caused by procedures gone wrong. But fracking has its perils, even when the process goes as planned. It takes more wells to extract a given quantity of energy from tight sources of unconventional gas than it does from free-flowing pockets: more drill sites, more diesel engines, more trucks. More fracking. Such production also drops off faster than it does from conventional pools, meaning replacement wells must be drilled sooner. The industry needs to drill an estimated 800 new producing wells per year in Canada, just to keep up with the decline of existing ones. The cumulative effect has yet to be calculated, but concerns run from the mostly unmetered use of fresh water to the impact of constant industrial activity on the love life of Alberta ovenbirds.
In Texas, where the shale gas boom got rolling a decade ago, diesel exhaust and fugitive emissions (assorted gas leaks) from a thousand drill and production sites inside the Fort Worth city limits create more smog than all the cars, trucks, and aircraft in the metropolitan region the city shares with Dallas. The small town of Dish, to the north, lost its mayor when Calvin Tillman sold his house and moved away, saying his family couldn’t bear the nosebleeds, headaches, and other symptoms he blamed on the local concentration of gas operations. The town is now suing six companies, claiming their noisy compressors, truck traffic, and air pollution have reduced property values by an average of $75,000.
Just south of Fort Worth is where I first heard of fracking. I was researching a book about water and climate in 2007, and I met with nursery owner Jim Stegall to talk about his experience with drought. I found his premises down a dogleg road not far from where a neighbour’s illegal fighting cocks were crowing. He was a walking Texas contradiction: jeans, boots, and swaggering opinion juxtaposed with a sideline of teaching art and restoring fragile Rembrandts and Monets.
He blamed the death of some big trees on three years with barely a whisper of rain—but he ascribed the loss of two long-reliable wells to the fracking operation less than a kilometre from his greenhouses. “Now they’re everywhere,” he told me when we spoke again recently. Three more drill pads have joined the first near his nursery, with more to come. Gas production “is taking it out so much faster than the public would in a hundred years,” he said. “One day, they’re going to wake up, and there won’t be any water. We’ll end up begging to put in a pipeline to Canada.”
The gas lobby’s cleaner-than-thou comparison of its product with coal is hardly a fair fight, although some studies (contested by the industry) contend that fugitive emissions of methane, flared and vented gas, leaks from neighbourhood distribution pipelines, and the fossil fuels expended in drilling add up to a carbon footprint only marginally better than that of coal, and possibly a bit worse. That doesn’t count mountaintops blown off and miners killed to reach coal, of course, nor the problem of disposing of non-carbon wastes.
But the energy choices we face are more tangled than simply “frack gas—yes or no.” Even the purest green of renewable energy casts some shadow on the landscape. Want an economy where wind and sun do the heavy lifting? Meet the residents of upstate New York and rural Montana who have been protesting the construction of the transmission lines needed to deliver it. And try not to think about the mines in China that produce the rare earths amping up the power of wind turbines and photovoltaic cells. Hydro? Say goodbye to a little more of the lower Churchill River. Biofuels? They take even more water than frack gas, and the grain required to keep an SUV on the road for a year would feed two dozen hungry people for as long. Geothermal? It has been blamed for earthquakes in Switzerland, and has stalled in California due to the same concern.
In the search for alternatives to oil and coal, these are risks we are ill-equipped to judge. As if reading a menu that lists dishes but no prices, we simply don’t know what our energy options—including the radical one of using less energy altogether—will cost, once we fully account for everything we will give up to pursue them on the scale our appetites demand. For that, we need to know the price of labour, financing, and equipment required to extract a joule of gas out of the ground—or from the wind—and also the value of the streams likely to be ruined, the vistas damaged, the climate impacts incurred, and the incremental cost of health care for headaches, nausea, and dizziness (all of which have been blamed on proximity both to gas facilities and wind-farms) by either choice.
That’s not impossible. Efforts are under way in several places to develop inventories of natural capital and its contribution to financial and social well-being. Britain recently completed its first National Ecosystem Assessment, a four-year multidisciplinary effort to “provide a high level assessment of the status and trends of the ecosystems and the services they deliver,” and to place an economic value on their contribution to British well-being. It found that wetlands, for instance, control erosion and purify water to an annual value of $2.4 billion. We’re a long way from a similar study in Canada, but earlier this year Statistics Canada released a compilation of data selected to shed light on human activity and the environment. A private group led by Toby Heaps, whose Corporate Knights magazine advocates socially conscious business, is behind Canada’s natural capital accounting project, a proposed “balance sheet, income statement, and well-being return on investment analysis” of national ecological assets and liabilities. Such inventories could one day help us better calculate what we risk, as well as what we reap, from energy choices.
Meanwhile, gas accounts for about 40 percent of the energy we capture in Canada. Selling our surplus to the US (and perhaps Asia in the future) makes us money. Until our environmental accounting improves there is at least a case to answer that gas is a cleaner alternative to filthier fuels as we move to some combination of sustainable energy. That is the pragmatic truth fracking’s more fevered opponents ignore.
Its promoters ignore Murphy’s Law. Risk, Canada’s gas producers believe, is something you can literally rule out. As Janet Annesley put it, by “getting regulation largely and substantially right in the beginning… we can trust the regulator.” Then, if things go wrong, “[the industry] can go back to the regulator, and the regulator takes on that responsibility.” This sounds a lot like sending the rules committee to the penalty box for a player’s high sticking, but it aptly captures the slippery synergies when industry and government undertake joint ventures in the gas business.
In fairness, there’s every reason to believe that the hundreds of geologists, engineers, and biologists who work for Alberta’s Energy Resources Conservation Board and British Columbia’s Oil and Gas Commission take their responsibility to the public seriously. The Alberta board performed 25,373 site inspections in 2009, and reported finding only 1.4 percent in high-risk violation of their operating requirements. But as fracking expands, so does the opportunity for things to go wrong. It’s a numbers game, much like the rising odds of a fatal car crash once traffic density reaches a certain point. Alberta’s violation rate of 1.4 percent represents more than 350 sites where the public or environment were at risk. In Pennsylvania, at the epicentre of the Marcellus Shale gas rush, inspectors cited eighty-four wells for improper cementing and casing in 2010; in the first eight months of 2011, sixty-five more wells were for cited for the same offence. Not everyone follows the rules. Mistakes get made. Accidents happen.
We are an ingenious species however. In other spheres of activity we have developed a highly effective means both to reduce the risk of things going wrong and deal with the mess when they do, largely free of government’s direct intervention and usually free of the expense and emotional distress facing Jessica Ernst. We call it insurance.
“The one thing the insurance industry does well, is it’s always re-evaluating risk,” says Anastasia Telesetsky, a law professor and an insurance expert at the University of Idaho. “It’s extremely invested in making sure its numbers have accuracy.” Every driver is familiar with what else the industry does well: putting a price on that risk. The riskier your driving, the higher your premiums. As Telesetsky tells it, there’s a reason why landlords rushed to install automatic sprinklers in offices when they were introduced, even though the chances were small that their buildings would ever catch fire: their insurers made them do it.
She has proposed requiring American industries to carry liability insurance for damage caused by their activities’ contribution to climate change. Mandating energy producers of all kinds to insure against environmental liabilities and damage to infrastructure, she says, could improve the management of fracking risk—and of all those other more or less risky energy choices—in several ways. Private sector insurance mandates would take the job of assessing ecological risk away from industry and governments vested in gas production, and give it to independent agents with a financial interest in candour. It would acknowledge that some risks can’t be prevented—only mopped up after. But as with fire sprinklers, the prospect of lower risk premiums would reward greater care. Energy producers would no doubt pass on the cost to consumers. But that would accomplish additional good, closing the circle of responsibility for the impact of energy choices, and putting our ecological liabilities as consumers in our faces every time we open the gas or power bill. And that might even motivate us to change our choices and reduce our consumption.
Ecological economist Mark Anielski, Heaps’s partner in the natural capital accounting project, is a fan of eco-liability insurance for another reason: it could help us learn to appreciate natural assets before we destroy them. Insurance accepts that things get broken, but must be paid for. In this use, it would acknowledge that all energy companies, or for that matter any large industry, now and again damage nature and impair its services to society or the economy; but it would also require the marketplace to put a price on making that damage whole. As the cost of restoring damaged ecosystems became apparent, Anielski believes, it would inevitably reveal the far lower cost—and greater value—of preserving natural assets from destruction to begin with. “When the insurance industry begins to evaluate ecological risk,” he says, “the real market value of eco-services emerges.” That in turn would help us know the real risk we run, and the price we may pay, for every energy choice we face.
Professionalizing the assessment of fracking risk wouldn’t leave government without a role—on the contrary. For eco-liability insurance to work, governments would need to make it mandatory and stand behind plaintiffs’ right of action. These are hardly novel ideas. They constitute the central features of compulsory car insurance, and the reason why we aren’t all obliged to sue each other over every fender-bender. It may be too late for the Alberta and BC governments, which have grown habituated to gas revenues, to contemplate exposing their private partners to independent audits of their activities. But bullish hyperactivity has delivered an unintended consequence for North American gas producers: a glut of product that’s expected to keep prices low for years in a struggling economy. Regulators under pressure to permit fracking in central and eastern Canada could enjoy a breather, and a chance to think twice before they swallow whole the industry’s childlike assurance that getting the rules right means the rules will always be followed—or that they can cover every circumstance in what will always be a risky business.
Gluttons for energy that we are, we’ll still want that sweet icing, of course. But it would be better to know beforehand what it will add to our waistlines, and what it will cost to get the stains out of the carpet.
This appeared in the December 2011 issue.