Knowledge Problem

Michael Giberson

Fracking for natural gas continues to make headlines. For example, USA Today: “‘Fracking’ for natural gas also splits towns and families” and from Bloomberg, “Oil, gas companies injected toxic chemicals into ground, U.S. report shows.”

These stories extend the understanding of shale gas development a little, but mostly cover familiar ground. Another angle, mentioned here before, is that the big players in the industry favor regulation targeted to discourage cheap, low-quality shale gas development. See this discussion by Marc Gunther, based on a recent Shell Oil event. My summary: Every job done badly by low quality firms threatens to produce delays and potentially more-costly regulations that will hit the more established firms harder. By raising rivals’ costs in this way, the regulation-seeking companies may be maximizing the overall value of the gas ultimately produced from shale.

The new shale gas fracking news last week was generated by a research report on fracking that concluded fracking for natural gas has a bigger greenhouse gas impact over 20-years per unit of energy output than that associated with coal.

• Cornell Daily Sun: “Study: Fracking may be more harmful than coal use“
• Ithaca Journal: “Sides in fracking debate try to discredit claims“
• BBC News: “Shale gas ‘worse than coal’ for climate“
• Technology Review: “Just how green Is natural gas?“

I speculate two things account for the continued newsworthiness of natural gas fracking.

First, fracking is new to many people, raises some new concerns, and shale gas has emerged as a potentially immense resource (i.e., big enough to affect national energy policies). In part, the news stories reflect natural interest in the developments.

Second, the uncovering of this vast new resource creates social tensions, as a bunch of people are making sometimes substantial sums of money, mostly by being lucky rather than good. That is to say, people now receiving thousands of dollars – and sometimes millions – mostly bought their properties for other reasons and paid nothing extra for the shale gas resource they acquired because at the time of purchase it wasn’t worth anything. Envy and resentment over apparent unearned wealth help motivate social conflict, and social conflict makes news.

Michael Giberson

The Arkansas Public Policy Panel, a citizen policy non-profit that has been around since 1963, has commissioned a study of recommended regulations to cover oil and gas resource development in the state. The resulting study, “Model Oil and Gas Laws, Regulations and Ordinances,” concludes that many states and localities offer stronger regulation than currently provided for by the state of Arkansas. The report recommends numerous changes.

The report appears thoughtful as it sorts through the varying regulations of oil and gas drilling activity in several states. But this report really is no more than a beginning to analysis. The author has collated related regulations from various states and offered a considered opinion on how Arkansas might change its law, yet the reader gets very little in the way of reasons to agree or disagree with the author. The approach might be described as “here is what I found, this is what I think about it.” Good public policy analysis requires more.

For a simple example, consider the discussion of noise. The report observes that noise is a problem associated with oil and gas development operations, notes that it is not regulated by the federal government or most states (including Arkansas), describes a small number of state or local rules that do apply, then recommends “Arkansas implement a noise standard of 55 decibels during the day and 45 decibels at night.”

No explicit consideration of scale or scope of the problem, no discussion of whether the regulations imposed were effective in achieving the intended goals, no indication of whether the associated costs were worth the resulting benefits, if any, no examination of alternative legal or regulatory approaches, and no discussion of what legal responsibility or authority the state may have in this realm. We get the well-considered opinion of the author, but very little in the way of support for that opinion. Other topics are approached the same way.

Public policy decisions typically involve trade-offs, and a good policy analysis will help reveal the trade-offs involved. The report may be a start, but Arkansans will have to do more work before they can fairly assess the proposed recommendations.