Who pays the costs of fracking?

Environment Texas report shows Texas’s weak bonding rules leave communities exposed to drilling damage

Environment Texas Research and Policy Center

AUSTIN – Raising new concerns on a little-examined dimension of the fracking debate, Environment Texas Research & Policy Center today released a report analyzing Texas’s financial assurance requirements for oil and gas drilling operations.  Who Pays the Costs of Fracking? shows how Texas’s bonding requirements are completely inadequate to cover the cost and range of damage from dirty drilling.  

“From damaged roads to air pollution to contaminated drinking water, who is going to be there to pay the piper after the new gas rush is over?” asked Luke Metzger, Director of Environment Texas Research and Policy Center.  “With Texas’s weak bonding requirements, all too often individual residents and communities are going to be left with a heavy tab for fracking damage.”

Just reclaiming a fracking site can cost hundreds of thousands of dollars.   And the damage done by fracking – from contaminated groundwater to ruined roads – can cost millions of dollars.   As shown in Environment Texas Research and Policy Center’s report, Texas’s bonding requirements do not even come close to covering these costs:

• drilling operators are only required to secure up to $20,000 per well in bonds up front.  
• the state releases the drillers from even this paltry assurance after the site is reclaimed, leaving impacted residents, communities, and taxpayers on the hook for longer-term damage.

The report highlights that Texas has no systematic road bonding requirements. Texas allows haulers to exceed weight limits when they apply for a special permit, but the permit fee bears no relation to the cost of the damage an overweight truck can do. In recent testimony before the House Committee on Energy Resources, TxDOT Executive Director Phil Wilson explained that “while a…permit can cost as list as $255 per year…, the amount of road damage a truck with such a permit can cause is essentially unlimited.”

The report also comes along with new concerns that the drilling boom will worsen Texas air quality. A recent study found that smog pollution generated by drilling in the Eagle Ford shale could help cause the San Antonio region to fail federal air quality standards, threatening public health and necessitating significant expenditures to get back into compliance.  

Today’s report is the second in a series.  In the first report – The Costs of Fracking (2012) – Environment Texas Research and Policy Center provided documented examples of the dollar and cents costs related to the myriad environmental impacts of fracking – from replacing contaminated drinking water to fixing ruined roads to treating illness from air pollution.

Of particular concern for financial accountability are the long-term costs of fracking.  Texas already has more than 7,800 orphan oil and gas wells – wells that were never properly closed and whose owners, in many cases, no longer exist as functioning business entities. These wells pose a continual threat of groundwater pollution and have cost the state of Texas more than $247 million to plug. The fracking boom is now adding thousands of new wells to this mix.

“From coal to oil to mining, we’ve seen every boom of extraction leave a legacy of pollution that future generations are left to grapple with,” observed Metzger.  “We must not repeat our past mistakes by letting oil and gas companies off the hook for the damage they cause.”