Citizens around the country are concerned—with good reasons—about how unconventional oil and gas development (commonly the entire development process is referred to as “fracking”) will affect them and their families. As we learned at the recent UCS Center for Science and Democracy’s Branscomb forum, Science, Democracy, and Community Decisions on Fracking, people want to know the facts. What are the benefits of development? What are the risks? How will my community change? But for many, the concerns ultimately boil down to the most pressing of the questions:
Is fracking safe?
Science Informs Our Understanding of Risk
Science can shed light on addressing this question. In statistics, risk is the loss incurred from an event times the probability that the event occurs. So if an event has a small probability of happening but the consequences would be costly, then the event is high risk. In the case of hydraulic fracturing, if the probability of drinking water contamination is low, for example, but the consequences of such contamination come at a high cost to public health and welfare, then we might consider the activity to be high risk.
Investors in the oil and gas industry assess risks of different business activities. Some shareholders are concerned about the risks associated with fracking. Photo: Flickr user: hellosputnik
Science can tell us about the likelihood of different events associated with unconventional oil and gas development and it can help us estimate the losses if those events occur. Science can help us discern which fracking-related risks might be relatively more important to focus on than others. And it can tell us whether some risks can be mitigated through technologies and best management practices. But ultimately, science alone cannot answer the question.
The question of whether fracking is safe is a matter of how much risk is “acceptable” to a community and to a person. And that question involves more than science. What is important to communities? How much risk are individuals willing to accept, given their values, their concerns, and their share of the benefits? These are questions that individuals and communities must make for themselves aided by the best available science about the risks.
Company Shareholders Assess the Risk of Hydraulic Fracturing
One way to help us think about what is safe is to look at how others evaluate risks. We can learn a lot from those that need to accurately assess risks. Take company shareholders, for instance. Investors of companies involved with unconventional oil and gas development are concerned about the financial risk that such activities expose them to. How do profits of such development compare with the risks of the practice? Are spills and accidents likely and how expensive will they be? Ultimately, is the activity worth doing or do shareholders perceive it as too risky of an investment?
Since 2011, there have been at least 26 shareholder resolutions on companies’ hydraulic fracturing activities. Most of the resolutions request more information from companies about the risks of hydraulic fracturing. For example, a 2013 resolution filed by the shareholders of Chevron Corporation states,
“Investors require specific, detailed, and comparable information about how companies are managing the risks and rewards from shale energy operations. … Shareholders request … the results of company policies, procedures and practices … to minimize the adverse environmental and community impacts from the company’s shale energy operations.”
And shareholders are not alone. A 2011 report of the Investor Environmental Health Network and the Interfaith Center on Corporate Responsibility, Extracting the Facts: An Investor Guide to Disclosing Risks From Hydraulic Fracturing Operations, attests,
“It is necessary for investors to have assurance that company managers are reducing business risks by addressing operational hazards and are capturing the genuine, measurable business rewards flowing from environmental management practices that have the potential to lower costs, increase profits and enhance community acceptance.”
In Search of ‘Acceptable’ Risk
For investors, the question of whether or not fracking is safe is answered through quantitative assessment of the risks, but the answer also requires more. Investors need transparency in operations. They need assurance of best management practices. Unlike citizens faced with decisions around oil and gas development in their communities, investors are, ultimately, concerned with company profits. When companies take risks that jeopardize profits, shareholders can withdraw. However, like citizens faced with these decisions, investors need companies to address their concerns if the relationship is to be mutually beneficial.
In upcoming posts, my colleagues and I will explore what the science tells us about the risks of unconventional oil and gas development. But in considering these risks, it is important to remember the power and the limitations of the discussions. The science enhances our understanding of the risks; you can decide what safe means to you.