Everywhere you turn these days in the environmental world, people are talking about fracking. Fracking is short hand for hydraulic fracturing, a high tech method of extracting natural gas from shale located 1000s of feet under the earth’s surface. Basically, they drill a vertical well which then curves and goes horizontally, sometimes over a mile from the actual well-head. The entire pipeline is cased in cement and then high pressure fluids—water, sand, and other things—are pushed down the well causing fracturing in the shale. These fractures release the stored natural gas into the well.[i] The folks at the NY Times have got some great graphics that explain it.
There are many potential externalities associated with fracking. An excellent analysis of potential externalities from methane contamination of groundwater by Osborn, Vengosh, Warner, and Jackson, all from Duke, can be found in this paper. Today’s blog will focus on a different aspect of the fracking debate—the negative externalities associated with radioactive wastewater.
As it turns out, the rock formation that has trapped centuries old supplies of natural gas also contains radionuclides like radium. Some of the hydraulic fluid that is pumped into the well to open the fractures is lost to the rock formation, and some comes back up as wastewater. That wastewater contains elements from the rock formation including radioactive materials.
What happens to the wastewater? In most states it is injected underground. In Pennsylvania however, underground injection in not a viable option. In that state, up to half of it gets trucked to wastewater treatment facilities where it is treated and then discharged into local waterways.[ii] But those wastewater treatment facilities were designed to treat the pathogens and contaminants that come from your household wastewater—the water from your toilet, shower, dishwasher, and washing machine. They are not required to treat for radionuclides and are typically unequipped to do so. The fracking wastewater is treated and discharged into the waterbody, potentially with significant radioactivity remaining.[iii]
Meanwhile downstream there is often a drinking water intake pipe. That drinking water is further treated and tested for a variety of contaminants and sent to faucets in homes. EPA has drinking water standards for radionuclides including a standard of 5 picocuries per liter (pCi/L) for radium. EPA has standard for radium because exposure to radium in drinking water is associated with increased cancer risk. If a community water system violates the radium standard they have to notify their customers. Furthermore the utility has to figure out a way to come into compliance, which generally involves more expensive treatment.
Time for some economics. In last week’s post I argued that economists don’t think free markets can solve environmental problems and we needed regulation. So far, nobody has called me on that one. Probably because this is an environment school and I’m preaching to the choir. But, it turns out, that there is a strain of economics dating back to 1960s that argues regulation is not always necessary. The economist who first articulated this argument was Ronald Coase and he eventually won a nobel prize for this research. Coase would argue that if property rights are well-defined, the actors in my stylized fracking example could sort the problem out themselves through negotiation.
Let’s imagine that the right to dispose of the wastewater is granted to the drilling company. The burden of treating the radionuclides, should they exceed regulated levels, is on the drinking water utility. Coase would argue that the water utility could negotiate with the drilling company (or the wastewater treatment plant) to reduce the radium that is discharged, maybe by offering to pay for a program to recycle some of the wastewater or paying for additional treatment at the wastewater facility. The drinking water utility would choose to do that if those options were less expensive than treatment options at the drinking water plant. Alternatively, if the property rights to radionuclide free water were assigned to the drinking water utility, the drilling company or the wastewater plant could negotiate with the water utility to accept higher levels of radium in exchange for compensation to cover the additional treatment costs. The drilling company and/or wastewater plant would do this if those options were less expensive. Coase’s insight was that as long as property rights are well-defined and transactions costs are low, the parties can sort this out amongst themselves and the government need not get involved.
Notice that the Coasian solution to this problem existed only in the shadow of regulation–the radioactive wastewater imposed higher costs on the drinking water utility because they had to meet the EPA standard. However, in PA the radium standard for drinking water has essentially been nullified. PA water systems are only required to test for radium every 6-9 years and many drinking water facilities downstream of wasterwater plants accepting fracking waste have not been tested since 2005.[iv] We really don’t know how much of the radioactivity from the fracking waste might be making its way into drinking water supplies. Maybe dilution in the river is sufficient to lower radioactivity to levels acceptable by regulation. Maybe not. But perhaps it is time to enforce our existing environmental laws so that we can at least find out.
- In the absence of a binding EPA standard for radium, how well do you think the Coase Theorem will work?
- What would be involved in a non-governmental solution to the radioactive waste problem in the absence of direct drinking water regulation?
- Are there any positive externalities associated with fracking? If so, what are they?
[i] Kerr RA (2010) Natural gas from shale bursts onto the scene. Science 328:1624–1626.
[ii] Urbina, Ian “Regulation Lax as Gas Wells’ Tainted Water Hits Rivers,” New York Times. February 26, 2011. Available at: http://www.nytimes.com/2011/02/27/us/27gas.html?ref=drillingdown. Last accessed, September 1, 2011.