In little-noticed news arising out of a recent Gulf of Mexico offshore oil and gas lease held by the U.S. Department of Interior's Bureau of Ocean Energy Management, the floodgates have opened for Gulf offshore hydraulic fracturing (“fracking”).read more
Fine Print on Baker Hughes New Fracking Fluid Disclosure Policy Draws Skepticism
Fine Print on Baker Hughes New Fracking Fluid Disclosure Policy Draws Skepticism
Back in 2008, Cathy Behr, a nurse who worked at a Durango, Colorado hospital was hospitalized after suffering a cascade of organ failures. Days earlier, Ms. Behr had treated an oil and gas field worker who arrived in the emergency room doused in a fracking chemical mix called Zeta-Flow, the fumes from which were so powerful that the emergency room had to be evacuated. All told, 130 gallons of the apparently noxious fluid had spilled onto the Southern Ute Indian Reservation, an EPA report later noted, although the spill was never reported to local officials.
So what's in Zeta-Flow? Because the formula for the chemical, marketed as increasing gas production by 30 percent, is considered a trade secret, oilfield services company Weatherford International was never required to make the full answer public.
This secrecy was one of the first issues to be raised by public health officials investigating fracking pollution claims, who pointed out that without knowing what chemicals are used by the industry, it’s difficult or impossible to know what toxins to test for.
So at first blush, it seems like a major development that Baker Hughes, a major oil field services company, has agreed to stop asserting that the ingredients in its fracking fluids are “trade secrets” when it voluntarily provides information on the website FracFocus.
Indeed, the Department of Energy recently lauded the move by Baker Hughes to voluntarily disclose the chemicals used in its fracking formulas without invoking the controversial exemption commonly claimed by drillers. Deputy Assistant Energy Secretary Paula Gant called Baker Hughes' move “an important step in building public confidence,” adding that the department “hopes others will follow their lead.”
But a look at the fine print on that promise — and the company’s track record on disclosures — suggests that Baker Hughes' new policy may not be enough to keep the public adequately informed about the chemicals used in its fracturing fluids.
The FracFocus website, a site that is funded by the oil and gas industry and the Department of Energy and managed by the Ground Water Protection Council and the Interstate Oil and Gas Commission, has won praise from Obama administration officials in the past. “FracFocus has worked well for disclosure of chemicals,” Bob Abbey, then head of the Bureau of Land Management, told Congress in 2012.
But a study published a month later by Harvard researchers skewered the site, concluding that it “creates obstacles to [regulatory] compliance” and seems “structurally skewed to delete” records. And this March, a Department of Energy review concluded that at least one trade secret exemption was invoked at 84 percent of the over 60,000 wells tracked by FracFocus.
FracFocus recently loosened some of its policies on disclosures, meaning that companies no longer will have to identify the trade name of the compounds that a chemical is used in, just the well where the chemical was used. Baker Hughes told the Wall Street Journal that this change had relieved the company’s concerns that competitors could figure out the ingredients to particular chemical mixes.
The company's move drew strong praise from some policy-makers.
“While state law only requires the disclosure of some of the ingredients, further disclosure to the appropriate government entity is something that has been asked for by many of my constituents in energy-producing areas,” one Texas state regulator told the San Antonio Business Journal. “This is a big step toward further public acceptance of fracking and the economic opportunities that it has brought to many of our communities.”
But a closer look at the promise by Baker Hughes reveals it carries its own loophole.
The company has pledged not to invoke a trade secret exemption, “where accepted by our customers and relevant governmental authorities.”
Dr. Bernard Goldstein, the former dean of the University of Pittsburgh Graduate School of Public Health, who praised the move as “a step in the right direction” overall, told NPR that this language represented “a major hedge.”
Because Baker Hughes policy has yet to be implemented, it’s not yet clear whether any oil and gas companies that use Baker Hughes fracking fluids will invoke that exception. “We still need to go into negotiations with suppliers, customers, etcetera, and get all of our systems up to date,” Baker Hughes spokeswoman Melanie Kania told Bloomberg.
And voluntary efforts offer no enforcement options if companies fail to follow through.
Even under the very narrow circumstances that federal lawmakers say disclosures are mandatory, Baker Hughes officials have a history of misleading regulators regarding its fracking formulas. In 2011, a large number of oil and gas services companies, including Halliburton, Schlumberger, and BJ Services, a company that merged with Baker Hughes in 2009, were caught misleading Congress and the public about their use of diesel to hydraulically fracture oil and gas wells.
Due to the so-called “Halliburton loophole,” enacted in 2005, fracking is exempt from oversight under the Safe Drinking Water Act’s (SDWA) underground injection control (UIC) program – unless diesel is injected during fracking. “Any service company that performs hydraulic fracturing using diesel fuel must receive prior authorization through the applicable UIC program,” the EPA states on its website.
In 2005, while Congress debated regulation under the SDWA, industry representatives told regulators that the use of diesel during fracking was nearly nonexistent — they had signed a memorandum of understanding with EPA in 2003, in which they agreed to cease using diesel for fracking coal bed methane deposits near underground drinking water sources.
Accordingly, EPA officials assumed that companies weren’t fracking with diesel — but in reality, the industry continued to use diesel without informing EPA for years.
“BJ Services used the most diesel fuel and fluids containing diesel, more than 11.5 million gallons, followed by Halliburton, which used 7.2 million gallons,” Reps. Henry A. Waxman, Edward J. Markey, and Diana DeGette wrote to then-EPA administrator Lisa Jackson. “This appears to be a violation of the Safe Drinking Water Act.”
An October update to the Congressional investigation revealed another 500,000 gallons of unreported diesel used during fracking. Although the industry insists that frack fluids are 99 percent water and sand, at least one well was fracked using diesel as a base fluid instead of water.
“This report shows they haven't even complied with this limited provision,” Dusty Horowitz, an Environmental Working Group attorney, told The New York Times when the diesel concealed by Baker Hughes and other fracking companies were first revealed. “How can communities trust these companies to drill responsibly?”
In the wake of these revelations, the EPA drafted guidance released earlier this year that would cover the use of diesel during fracking. But the agency has stopped short of banning the use of diesel during fracking.
In the absence of federal action, state regulators have adopted their own rules on fracking chemical reporting. Twenty-three states have begun requiring fracking fluid disclosures since 2010 — but most include trade secret exceptions.
Baker Hughes aside, the oil and gas industry is still aggressively pushing to keep fracking fluid ingredients secret. “A company’s trade secrets can be among its most important assets,” wrote the American Petroleum Institute, America’s Natural Gas Alliance and other industry groups wrote last month in a letter to the Department of Energy objecting to the agency’s criticism of FracFocus, “the key intellectual property that allows it to keep its market position for its products or services and provide value to its shareholders.”
Despite its potential loopholes, the move by Baker Hughes does represent an unusual step back from asserting those privileges.
“While Baker Hughes should be commended for finally coming around to this understanding, the industry has been far too slow and far too resistant to efforts to improve transparency,” wrote Loren Steffy, a Forbes contributor. “After all, the secret recipe for Coca-Cola has been considered one of the most closely guarded trade secrets in the world for more than 125 years, yet Coke still puts the ingredients on every can. If soft drink makers can do it, so can drillers.”
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