A well-regulated fracking

New Zealand's Parliamentary Commissioner for the Environment confirms that fracking can safely be undertaken in New Zealand. Her next report will check whether fracking as it currently is undertaken in New Zealand is consistent with international best practice.

There are real risks from badly managed natural gas extraction. Those can either be mitigated by well designed regulation mandating cost-effective best practice, or through use of a liability regime mandating that an extracting company post a bond (or demonstrate insurance) sufficient to compensate against worst-case water contamination. The latter being pretty unlikely to happen here any time soon, regulation seems the more effective way of ensuring against the socialisation of downside risk. 

Here's Rosemary Quinn, Head of Petroleum Geosciences at GNS:

“This is a timely and balanced report that sets out the concerns in New Zealand about possible environmental impacts of hydraulic fracturing in the oil and gas industry. Dr Wright has put fracking into context as a possible part of the life cycle of planning, drilling, operating and abandoning a well. She concludes that she has not seen anything that is a high and urgent concern that would warrant calling for a moratorium on hydraulic fracturing in New Zealand. The report rightly focuses on the need for effective regulation and enforcement in order to ensure the safe operation of hydraulic fracturing in New Zealand.”

The Greens continue to call for a moratorium on fracking until it can be proven safe. I'm not sure that there is any level of regulation that they would deem consistent with fracking being proven safe. Here's the Green Party press release.

Mr Hughes urged the Government and councils to take a safety-first approach and put a halt on fracking until we have strong regulations in place to ensure the health of people and the environment.

"The fact that the PCE cannot not guarantee that world best practice is being implemented in New Zealand and has pointed out many potential gaps in regulation is in itself a compelling case to implement a moratorium on fracking.

"The PCE has identified numerous ways in which fracking can cause environmental harm, and said, "the potential for important aquifers to be contaminated as a result of fracking is very real.'

Gareth Hughes' tweet here was mildly amusing:

PCE report says Frackers do not have a social license to operate, regulation fragmented & light-handed & water contamination risk very real
— Gareth Hughes (@GarethMP) November 27, 2012

The PCE report says that industry needs to do more to earn a social license to frack - it has to engage and consult with the public to tell them what they're doing. Here's the report:

In New Zealand, it appears that fracking has not yet earned its 'social licence'. Concerns about fracking are many and wide-ranging. They include the potential for contamination of important aquifers, triggering earthquakes, whether regulators have the capacity to deal adequately with concerns, as well as the impact on climate change. The concerns are not just environmental; some are questioning to whom and where the economic benefit will accrue. Increasing public understanding of the technology should help address some concerns. There may well be some changes in public engagement that could help – for example, combining regional council and district council hearings on applications for resource consents. But ultimately what is needed is trust – trust
that government oversight is occurring, and that regulation is not just adequate but enforced, and seen to be so.

One of the reasons that industry has to work hard to increase public understanding of the technology is the scaremongering campaign run by the Greens; they then fault industry for not having sufficiently assuaged the fears that the Greens helped stoke. PCE hasn't endorsed the regulations we do have, but sees no need to put in any interim moratorium.

It will be interesting to see what the Greens do when the Second Report comes out. If tightened regulations are recommended as sufficient, will the Greens support those recommendations, or will they stick to the more Gaia-based policy line?