Fracking companies impose additional financial burdens on communities. Even in the US where landowners earn royalties from the gas extracted from under their land, it's been suggested that the cost of the side effects of fracking to local communities could exceed the gains they'll receive from extraction royalties and increased tax revenues.
The Environment America Research and Policy Center's report, Costs of Fracking, documented millions of dollars of costs imposed by fracking, including:
- Health costs: health costs from air pollution in Arkansas' Fayetteville Shale region was estimated at $9.8 million in one year. In Texas' Barnett Shale region, health costs reach $270,000 per day during the summer season.
- Public roads: a Texas task force approved $40 million for road repairs in the Barnett Shale region as a result of gas companies' heavy use of trucks, tankers and machinery transports.
- Drinking water: $11 million to permanently replace residents' contaminated drinking water in Dimock, Pennsylvania.
Other fracking costs documented in the report range from farmers losing livestock after drinking from contaminated water to homeowners losing property value. The same issues occur on the mainland. Local councils on the mainland identified a range of other costs that the industry brings to communities.
John Rumpler, Senior Attorney for the Environment America Research & Policy Center said that "...in many cases, the public will be left holding the bag for those costs".
Policymakers can and should insist that unconventional mining companies - rather than taxpayers, communities or families - pay the costs of fracking damage. Full cost accounting that includes the total cost of fracking developments would ensure the total costs are borne by the companies that profit from shale gas drilling. Fracking companies should not be able to deftly privatise profits and socialise costs.
Public Health Costs
It's not really possible to quantify the true extent of the rise in public health costs as a result of unconventional gas developments. The actual cost to the bottom line of the health budget in Australia may only be revealed if fracking related illnesses are included as a line item in the annual health budgets of state and federal governments.
However, the Environment America Research and Policy Center's report, Costs of Fracking reported that in the Fayetteville Shale region in Arkansas, the health costs from air pollution were estimated to be as high as $9.8 million in one year. Health costs in the Barnett Shale region in Texas is said to have reached $270,000 per day during the summer season.
The likelihood is that the full scope of fracking-related health costs might not be known for years, and perhaps decades. The Concerned Health Practitioners of New York warn that:
Earlier scientific predictions and anecdotal evidence are now bolstered by empirical data, confirming that the public health risks from unconventional gas and oil extraction are real, the range of adverse impacts significant, and the negative economic consequences considerable. Our examination of the peer-reviewed medical and public health literature uncovered no evidence that fracking can be practiced in a manner that does not threaten human health.
Numerous studies have highlighted the health impacts and the significant risk fracking poses to public health. People are getting sick and their illnesses can't be classified and dismissed as minor complaints.
Much less research has been done in the area of quantifying the economic cost of fracking in terms of the productivity costs of days off from workers who are sick or caring for sick family members. In part this could be due to the fact that many of the more debilitating illnesses will only become apparent after many years of cumulative exposure to toxic fracking chemicals and pollutants. The effect of secretive out of court settlements and non-disclosure agreements could also play a part in hampering researchers' efforts to gather data. As the Concerned Health Practitioners of New York note:
...industry secrecy and government inaction continue to thwart scientific inquiry, leaving many potential problems—especially cumulative, long-term risks—unidentified, unmonitored and largely unexplored. This problem is compounded by non-disclosure agreements, sealed court records, and legal settlements that prevent families (and their doctors) from discussing injuries. As a result, no comprehensive inventory of human hazards yet exists.
The value and saleability of properties plummet when your neighbour is an unconventional gas development. The dramatic reduction in private property values is a widely known fact, and has been the personal experience of a number of gasfield 'property victims'. The Landline program Pipe Dreams showed the reality of plunging property values as far back as 2010.
There are 200 wells in our neighbourhood, compressing stations, pumping stations, a central processing plant; we have gas wells flaring off around us continually, a compressor roaring 24 hours, seven days a week. It's turned from a tranquil area to an industrialised nightmare. My land is unsaleable, it's nearly uninhabitable, and my property has lost 25 per cent of its value just by having the developments next door. My neighbours may have fallen for it but they're now regretting it.
A failed auction in February 2015 in the Western Australian mining town of Port Hedland is a stark reminder about the impact of mining booms and busts on ordinary families. A 60 year old fibro house that was bought for $1.3 million in 2011 was passed in at auction for $360,000. The loss of almost $1 million in under 4 years is a staggering amount that few homeowners can 'get over'. The housing market in the Pilbara region is also on the decline.
Concerns about falling property values when fracking developments are involved have prompted some states to publish maps showing where fracking is permitted to take place, and where water supplies are drawn from.
US and UK Reports
A joint study by University of Calgary and Duke University researchers looked at property sales from 1994 to 2012 in 43 counties in New York and Pennsylvania. The study mapped sales against their location in relation to shale gas wells and found properties that were 1.5 kilometres from gas wells sold for about 10% less, and properties within 1 km of a gas well dropped about 22% in value.
Possibly to bolster its position of we're backing fracking, the UK government heavily redacted a report Shale Gas: Rural Economy Impacts that reported the dismal effects of shale gas drilling on house prices.
Exxon-Mobil CEO Fracking NIMBY
And in what must be one of the most hypocritical acts so far this century, in February this year the Wall Street Journal reported that Rex Tillerson, CEO of ExxonMobil, the largest natural gas producer in the United States, joined a lawsuit opposing the construction of fracking infrastructure near his home, on the grounds that traffic hazards and increased noise pollution will devalue his property.
An excerpt from the lawsuit, filed to stop the construction of a water tower near Tillerson's ranch in Dallas, says:
The Plaintiffs have no adequate remedy at law for the injuries just described. The injuries and losses are continuing. The property and rights owned by Plaintiffs are unique and irreplaceable so that it will be impossible to measure accurately in monetary terms the damages caused…
Private Property Rights
The diminished value of people's private property, and in the case of agriculture, people's businesses and livelihoods, must be viewed in the context that:
- Residential homes are overwhelmingly the largest capital investment most Australians make in their lifetimes. The loss of a significant proportion of the value of any family's largest asset – up to and including an inability to sell – has a seriously deleterious effect on people's net worth which is, in most cases, disproportionate to the amount of compensation they receive from 'lease agreements' with gas companies
- While private property owners in Australia don't own the mineral rights under their land and aren't entitled to any royalties from the gas that's extracted from their property, they also have no right of veto over miner's access to their land. In Tasmania, under our draconian Workplaces (Protection from Protesters) Bill 2014 farmers can be prosecuted for protesting a company's right to drill on their land. One farmer's submission to the government's Review of Fracking said:
The Tasmanian Government has passed the Workplace Protection from Protestors Bill 2014 through the Parliament. The workplace will include anywhere there are mining operations or exploration for minerals. The content of this legislation is a major reduction in landowners' rights and a sad day for democracy. This legislation goes too far in favour of the workplace.
So in the case where I obstruct or conduct a protest on my own property about the mining activity being conducted on this land, then I will be breaking the law. It becomes even more absurd when conducting a meeting on my property “for the purposes of promoting awareness of or support for an opinion or belief, in respect of a political, environmental, social, cultural or economic issue” I would also be breaking the law! In addition in these examples the arrest can be made by a police officer without a warrant.
Indeed if I was undertaking a peaceful protest outside my property boundary on public land I would also be breaking the law. The act reads (Meaning of protester and engaging in a protest); (2) For the purposes of this Act, a protest activity is an activity that – takes place on business premises, a business access area in relation to business premises, a road, a footpath or a public place.
The landowners previously had few rights in relation to mining activity on their land and now the right to protest about what is happening on their own land has also been taken away. I would like people to imagine how they would feel if a mining company came along to your land and home and wanted to conduct a mining operation on that property and there was nothing you as the legal owner could do to stop them. This is exactly the situation that the farmers are in.
Lenders Opt Out
Analysts have raised concerns that the drop in value of properties located near fracking fields could influence the relationship between farmers and their financial backers. They've suggested that banks could consider the risk of lending on properties is too high, when the land value is likely to nose dive when gas wells are drilled.
In short, bankers might begin to refuse loans to businesses and property owners affected by fracking. The analysts' crystal ball did not need to see too far into the future. In 2013 Rabobank, one of the world's largest agriculture lenders announced that it would decline to offer loans to farmers with gas leases on their properties.
In recent years politicians have insisted that Australia is facing a gas crisis and that more gas projects are needed to keep energy prices down. Media reports have also claimed Australia will soon suffer from a drastic gas shortage. Not surprisingly, APPEA agrees that "further development of...gas projects is the clearest way to put downward pressure on gas prices and provide energy security for the state".
A new report by the Australian Energy Market Operator, manager of the national electricity market, says gas shortages are not expected in the short, medium or long term.
In any case, the industry's claim that allowing rampant fracking will solve a gas supply problem is fatally flawed. Our gas is shipped offshore where energy companies get a much higher price than if the gas was sold on the domestic market. Unlike other OECD countries, Australia doesn't require its gas producers to set aside a reserve of gas, which must be sold at domestic prices, for domestic users.
With the completion of the Gladstone Liquefied Natural Gas pipeline gas prices in Australia became permanently linked to the Asian market. Gas producers can now export gas overseas, where they get $9 or $10 or more per gigajoule on the international market compared to the domestic rate of $3 to $4 per gigajoule.
As a consequence, consumers here will no longer pay cheap domestic prices, and will instead pay the international price for their gas. The NSW Independent Pricing and Regulatory Tribunal confirms that Australian wholesale gas costs and network charges will increase. Supply side competition will not lead to lower gas prices. No amount of gas mining in Tasmania or elsewhere will reduce gas prices.
Virtually all economic analysts refute the claim that fracking will reduce energy costs. Instead, it is generally agreed frack gas will discourage investment in renewable energy technologies; and lock us into continued reliance on fossil fuels and an increasingly volatile and expensive international gas market.
The fact that mining companies are almost entirely foreign owned means that the bulk of the profits are expatriated. A report from The Australia Institute, Mining the Truth: The rhetoric and reality of the commodities boom says that around 83 percent of the profits from resource extraction here will be sent offshore to foreign owners of the mining operations carried out in Australia.
In contrast to the United States, where abundant natural gas is used domestically and is reducing prices, Australia's gas is largely exported.
Economic modelling by Deloitte Access Consulting estimates that by 2025 the gas price rise caused by unconventional gas exports will hand an $87 billion dollar windfall to the almost entirely foreign owned gas export companies, while simultaneously costing Australian manufacturers $118 billion dollars.