In this series, I'll game-out strategies of different anti-fracking groups. Should the environmental movement compromise on watered-down regulations, or instead take a radical stand against the fracking industry's very existence?
By Jon Riley
The environmental impacts of natural gas fracking are so absurd and cartoonish that they're impossible to ignore. People are waking up to discover that their tap water is flammable, thanks to fracking contamination. [1] Crazier still, a recent study in the Proceedings of the National Academy of Sciences found a correlation between fracking and earthquake epidemics in areas with no previous seismic activity. [2] Yet there's still a debate within the environmental movement about whether to push for practical regulations or whether to demand that state governments ban the whole fracking thing. [3]
The environmental impacts of natural gas fracking are so absurd and cartoonish that they're impossible to ignore. People are waking up to discover that their tap water is flammable, thanks to fracking contamination. [1] Crazier still, a recent study in the Proceedings of the National Academy of Sciences found a correlation between fracking and earthquake epidemics in areas with no previous seismic activity. [2] Yet there's still a debate within the environmental movement about whether to push for practical regulations or whether to demand that state governments ban the whole fracking thing. [3]
The Environmental Defense Fund (EDF) is one environmental group that believes fracking should be regulated, but not banned entirely. They want to stop fracking's environmental harms, but they argue these can be mitigated through simple regulations. EDF points out that for the next decade or so, fossil fuel dependence is inevitable: we have to use some amount of petroleum for now, until we've fully constructed the energy infrastructure for a green economy. So we should use natural gas, which has lower carbon emissions, instead of even dirtier fossil fuels like coal and oil. They see natural gas as a "transition fuel" during our long-term switch to clean energy. [4]
Environmental organizations that are working to ban fracking believe it can never be safe. Environment America's recent report, "The Costs of Fracking," demonstrates that the most harmful environmental effects are inherent in the hydraulic fracturing process itself, so there's no regulation strong enough to prevent them. [5] Another report by Food & Water Watch, "Why Fracking for Oil and Natural Gas is a False Solution," shows that even if, starting tomorrow, we deregulated fracking everywhere, the gas would still take 50 years to extract. [6] So fracking can't produce enough short-term natural gas to be a transition fuel. Even worse, we'd be committing to several more decades of fossil fuel dependence. Natural gas production would crowd out clean energy: low natural gas prices would undercut true green alternatives like solar and wind.
There are two primary interest groups who have a stake in the fracking debate, and they will be the two players in our game: the Environmental Activists and the Gas Industry Lobbyists. Here's a typical scenario: the Environmental Activists and their legislative allies are pushing the Gas Industry to compromise on some common sense fracking regulations. If the Industry and the Activists both came out in favor of proposed regulations, they would be guaranteed to pass: the Industry could use its immense lobbying power, and the Activists could stamp the bill as an environmental victory. [7]
But if the Industry opposed the bill, many believe EDF would not be willing to fight back: the Director of Food & Water Watch complained that the Environmental Defense Fund "will claim to represent environmentalists while they promote regulation that is so weak even the gas industry can live with it." [8] Then by rejecting all regulations, the Industry can continue extracting the full profit value of the fracking operation. This full profit value of the fracking operation in a world with no regulations is represented below by the variable V.
We'll model EDF's bargaining strategy as a single-round ultimatum game. In the rest of this fracking series, we'll build on the simple structure established here to model slightly more complex bargaining games. We will only show the Industry's payoffs for now, because the specific question we want to investigate is, what is the most comprehensive set of regulations the Environmental Activists could offer that the Industry Lobbyists would accept?
The Environmental Activists could propose a wide range of different fracking regulations, each of which is likely to increase the cost of fracking. On the game tree, the cost of these different amounts of regulation is represented by the variable C. Let's define C as the cost the regulations impose on the Gas Industry as a percentage of the fracking operation's total profit value (V). Say that total deregulation of fracking corresponds with C = 0, and that a comprehensive ban corresponds with C = 1, so 0 < C < 1. For example, C = 0.25 means the proposed regulations would cost the industry 25% of the total value of it's operation.
The Industry Lobbyists can accept or reject the Activists' compromise offer. If they accept, the regulations will likely pass. The Industry's payoff would be V * ( 1 - C ) dollars, representing their potential profit from fracking after regulatory costs are imposed. But if they reject the offer, then the deregulated status quo remains. The Industry's payoff would be V dollars: they're free to reap the full profit potential of the fracking operation, unhindered by costly burdens like human well-being. So clearly the Industry Lobbyists would reject any offer other than total deregulation ( C = 0 ).
Eric Pooley, the Senior V.P. of the Environmental Defense Fund argues, "Natural gas is being developed whether any of us likes it or not. We have no choice but to fight for strong regulations." [3] So EDF just concedes from the start that accelerated fracking development is inevitable. This concession is a major strategic blunder: if the Industry knows that it's going to get to frack no matter what, they'll never agree to any regulations.
In part 2 of this series, I'll show why if the Activists want to win this fight, they have to be brave enough to threaten the industry with a ban. Read part 2 >>
