The other day, I made a Twitter pronouncement that market forces should be embraced where 1) consumers have good access to information; 2) there is legitimate choice; and 3) the costs of production are not externalized on to people who are not parties to the transaction. (I like my blanket decrees to be in lists of three – e.g., profit should reward 1) labor; 2) creativity; or 3) risk; and government should be 1) of the people; 2) by the people; and 3) for the people.)
The process of fracking to extract oil strikes me as a market activity that doesn’t meet items #1 or #3 (of the first list). We don’t know what chemicals are in the solvent the frackers are pumping into the rock; and the frackers aren’t acknowledging, let alone paying for, the damage that is caused to those who come into contact with the waste from the process.
[Hydraulic fracturing] is the process of initiating and subsequently propagating a fracture in a rock layer, by means of a pressurized fluid, in order to release petroleum, natural gas, coal seam gas, or other substances for extraction. The fracturing, known colloquially as a frack job (or frac job), is done from a wellbore drilled into reservoir rock formations. The energy from the injection of a highly pressurized fluid, such as water, creates new channels in the rock which can increase the extraction rates and ultimate recovery of fossil fuels.
The EPA is signalling that it is getting into the business of regulating fracking. The usual suspects – industry and anti-government lawmakers – are criticizing the EPA for getting involved. But the market alone can’t keep fracking companies honest. We don’t know what, exactly, they are pumping into our streams and groundwater. We can’t honestly expect them to freely admit that they are contaminating the water that others drink or rely on for other purposes. And, the price of their product does not reflect the damage caused by such contamination.
Where the price doesn’t reflect externalized costs, the market is not efficient in allocating resources. Externalized costs are an involuntary subsidy that distorts the signals sent to the market place.
Regulation certainly has it’s problems, but I don’t think – by and large – libertarians, market enthusiasts, or anti-government ideologues are advancing effective responses to this sort of situation that do not involve a good deal of government regulation.
Those who advocate less regulation and oversight concern me in several respects (granting that there are many examples of nit picking oversight). The economic mess we now are experiencing could in large part be laid to the point that allowing businesses to do whatever they want can have very serious consequences for all. In the environmental area there are several concerns with simply leaving to profit making and/or ego types to do whatever they wish as to extraction, processing, and movement of materials. Does anyone really thing it was completely accidental all the environmental “accidents” we have experienced? And, I believe there are very few real accidents if defined as an event which could not have been predictable–like taking a corner on a slick road at 70+mph any bad outcome is not an accident.
The onus should be on your side to prove that this is really an issue. Not that there “could” be problems, but that there actually are problems. That has not been the case.
Certain elements in the industry would love for the EPA to step in. Regulation serves the interests of the largest players, who can most afford to deal with the costs of regulation as well as influence the regulators themselves. That is the dirty little secret of regulation that your side always ignores.
Finally, we need to discuss the benefits of fracing. Even if fracing is everything you make it out to be, the value of the process is such that it shouldn’t be stopped.
BTW, economically speaking, none of the 3 items are needed for a free market. Most markets do not meet your 3 criteria, and they operate just fine. More importantly, government itself does not meet your 3 criteria (switch “consumers” to “regulators”), so how could regulators perform any better than markets?
My sister-in-law’s water now foams up and turns to plastic when you apply fire to it. All after a fracking operation moved into the neighborhood. So, I’ll have to disagree with you about this being merely hypothetical.
By the way, where did you come by the authority to assign onuses? That’s not the best superpower I’ve ever heard of; but it’s not bad.
There is a long history in this country of people’s property being damaged by mining operations, and the ONUS being on the companies to compensate those damaged. So it is not even clear to me that, if there really is damage, people are uncompensated.
As to your sister-in-law’s situation, methane is not soluble in water. A stilling tank with a vent right at her wellhead will take care of the situation. I would think that if this is a real problem, that is what the drilling company is going to be paying for.
What I was getting at with the ONUS comment is that a lot of these regulatory issues are emotional and are fought with emotions in the media. But what is the real cost of the problem, and how does that compare to the benefits of the activity, as well as the costs of regulation. And what is the track record of regulation? And what alternatives to regulation (which doesn’t work) are out there?
I keep being reminded of events such as the Gulf oil spills and the very great likely point that inadequate precautions were taken by the companies involved–the old “bean counter” point of so if it happens we will pay (of course after denial and lots of legal dodging). I believe in the merits of free enterprise but I do not believe in the tooth fairy.
I keep being reminded of events such as the Gulf oil spills and the very great likely point that inadequate precautions were taken by the companies involved–the old “bean counter” point of so if it happens we will pay (of course after denial and lots of legal dodging).
The gulf spill was so large that BP almost went out of business. I don’t think that that proves your point.
From Jack – The economic mess we now are experiencing could in large part be laid to the point that allowing businesses to do whatever they want can have very serious consequences for all.
There are two sides to the coin of the mess we are in. Yes, more oversight may have stopped what crashed the banks but over-regulation (in the form of forcing banks to give loans to people who could not quality otherwise) is what ultimately led to their demise.
Buzzcut, sometimes it seems you have selective reading. Several independent panels have laid the blame squarely on BP and other contractors for inadequate operations and failing to follow even established industry guidelines let alone any regulations. Even if it cost BP their existence it does not justify their operations even if we do not count the eleven deaths but only the environmental problems AND the increased regulations that will/should be placed on others.
But your point was that they were reckless, thinking “if we make mistakes, we’ll just pay some fines”. But that wasn’t the case. The scope of the damage (and thus, costs) was such that, I guarantee you, they did not have that attitude.
Being an engineer (and that spill was a massive engineering failure), I know that hindsight is 20-20. Thank goodness I’ve never made mistakes of that magnitude. Things like “industry standards” and even governmental regulations are fine, as long as you know they’re there and follow them.
So, Buzzcut, I can come over to your property, have a party, and as long as I don’t have any damages that can be traced back to me, that is OK?
Can you prove it was someone from my party that backed up your toilet? I swear, that mirror was broke before we got there, and I never saw that Rolex that you now claim is missing.
I don’t understand why you have faith in judges to figure out who is at fault but not for regulators to prevent the “bad things” from happening.
Personally, I think both do a lousy job, so I’d rather have both involved instead of only one. The hope is that fewer things slip through with two idiots rather than one.
Going to the example Doug posted with his sister, your solution is to remove the methane & all will be well, since that is the only thing we can see as damage today.
My grandparents & many others in their neighborhood died from obscure illnesses. After they all died, it was discovered that a hazardous waste recycling company (that had since gone out of business) had let contaminants into the groundwater, and those contaminants *could* have caused those diseases. They could have also been caused by other things.
Now, your answer is that some CEO is going to worry about preventing deaths that won’t occur until long after he has retired or his company is disbanded, because he cares about a lawsuit that the kids of the deceased will have a hard time winning. You really think that works?
Back to Doug’s sister, just because you remove the methane doesn’t mean that those unidentified chemicals that the fracking company is putting in there didn’t also reach the water. His sister (or her children) may not discover the damage until it is way too late.
A settlement check doesn’t replace a life.
You guys are asking for a level of risk (or lack of it) such that no economic activity ever will meet it.
And then you bitch about gas prices and moan about how there are no jobs.
Maybe I’m biased, because I work in an actual industry that makes actual things, and have to deal with regulations and regulators and all the crazy shit that is the result, and see how nothing can get done in this country as a result.
You wonder why there’s no infrastructure being rebuilt in this country, but don’t see how it’s regulations that have raised the cost per mile (or whatever benchmark you want to use) by literally a factor of 100, to the point where we CAN’T afford to built anything.
And then you wonder why everything is made in China. Well, like it or not, they don’t have this risk aversion that we have. And maybe they take that too far, but there has to be a happy medium.
I don’t bitch about gas prices.
I would think that the onus would be on the company that is drilling past the water table and injecting carcinogens down that whole to prove that it’s safe. Instead they sought (successfully) to be exempted from the Clean Water Act that was designed to regulate such things.
Things are made in China because we lowered trade barriers in our quest to have ever more ridiculously cheap shit, without a thought about the effect it would have on the job market. Things used to be pretty good around here. But if we just lower wages to Chinese levels, and dump our wastes cheaply into rivers, and maybe outlaw OSHA, we can be as awesome as China.
T, you can think that all you want, that the answer to China is trade barriers, but it doesn’t change the FACT that even in areas that we don’t compete with the Chinese (building roads is my example), costs are simply out of control.
A bridge that used to cost a few million bucks now costs $150 million. The costs aren’t 10 times more than they were 20 years ago, they’re 100 times more. And it’s regulations that did it.
The bottom line is that a bunch of elites and intellectuals and others who haven’t ever done a damn bit of real work in their lives have created a system where work simply can’t get done. It’s bankrupting America, and the chickens are coming home to roost with the current unemployment rate.
I bitch about gas prices being too cheap, does that count?
I’ll agree we’re lost a good deal of our willingness to risk things. In many cases (terrorism, for example), that risk is unfounded. We’re safer now than ever before from violence. In other cases, we’re learned through the deaths of others that some things just aren’t worth the risk.
To your point about infrastructure: Why are we spending less on it than in years past? If what you say is true, we should at least be spending the same amount & getting far less in return. We’re spending less & getting less right now, so I don’t know how you can blame that on safety concerns.
We’re spending less & getting less right now, so I don’t know how you can blame that on safety concerns.
I don’t know if we’re spending less in dollar terms, but in terms of what it costs to build a standard highway bridge, or what it costs to repave a mile of highway, the costs have skyrocketed. Safety regulations are one cause of that, but I think environmental reviews and some other obscure regulations have more to do with it, not to mention prevailing wage laws.