What Should 'Conscious Capitalists' Do About Fracking Earthquakes?

Circumstantial evidence points to the high-pressure injection of wastewater into deep disposal wells as a potential trigger for small earthquakes. Case in point is a recent 4.0 magnitude temblor that rattled windows across hundreds of square miles around Youngstown, Ohio. The epicenter was located suspiciously close to a disposal well owned by a wildcat operator named D&L Energy. A series of these unusual seismic events prompted state authorities to suspend wastewater injection pending a more thorough investigation.

The nascent Conscious Capitalist movement could hardly find a more interesting problem to address than defining the rights and responsibilities of corporations seeking to dispose of their effluent in this manner. For those not yet familiar with Conscious Capitalism, it is a movement spearheaded by Whole Foods CEO John Mackey and Bentley Professor Raj Sisodia. Their ambition is to shift capitalism's tarnished brand away from the greed-is-good, profit über alles caricature exemplified by Gordon Gekko toward a kinder and gentler mission aimed at satisfying both the economic and sociological needs of broader stakeholder communities.

Drilling for natural gas using hydraulic fracturing methods, or fracking, has emerged as the most consequential new energy technology of the century. As fossil fuels go, natural gas is so much cleaner than coal and oil that rational environmentalists should be celebrating its resurgence. Natural gas also generates fewer greenhouse gases when burned. As for those who worry about energy independence, fracking has not only reduced the need to buy oil from foreign despots, it has turned the U.S. into a net energy exporter for the first time in seven decades. And when it comes to high-paying jobs, only green fantasists can pretend that the more than 40,000 U.S. fracking wells in operation somehow drilled themselves, or that the equipment used to outfit them sprang into existence unaided.

First, let me discuss a few facts and side issues to frame the earthquake debate. The seismic problem is real and not another example of media fueled hysteria, like the thimerosal and Alar scares. Scientists have known for decades that oil and gas production can trigger seismic activity and have developed numerous ways to mitigate it.

Second, fracking itself is not implicated in any of the recent seismic events. Fracking generates tensile stress and the release of an entirely different form of stress called shear stress causes earthquakes. It seems that the high pressure injection of wastewater can lubricate faults, causing the release of shear stresses that have built up over eons. (Fracking has other potential problems, such as the risk of groundwater pollution if the well is improperly constructed or operated, but that is a separate issue that is already being dealt with on its own.)

So what's the real problem with fracking? It's purely political. While the spectacular decline in the price of natural gas has been a boon to our battered economy, cheap gas hasn't done anything to make expensive wind or solar energy more attractive. Thus, frustrated environmentalists have launched an anti-fracking crusade to steer public support away from cheap and abundant natural gas toward expensive and unreliable "renewables." Exaggerated fears of earthquakes could easily be turned into a potent propaganda weapon.

So it behooves the industry to address the earthquake issue head on. Foot dragging awaiting conclusive "proof" that a particular wastewater injection well caused a particular earthquake would be a big mistake. Rather, energy producers should introduce a responsible program of investigation, mitigation, and compensation both because it is the right thing to do and because it is the best way to head off premature and ham-handed regulation.

Few industries have the seismic expertise of the oil and gas industry. This makes it imperative for energy companies to investigate the what, when, how, and where of wastewater-induced earthquakes, in order to put the conversation on a proper scientific basis. Unlike opaque global warming computer models that make all sorts of wild predictions, field experiments on the relationship between disposal and seismic activity can produce tangible and verifiable results. Ohio would be a good place to start, and it appears that D&L Energy has stepped up to fund some research.

But this is not enough. D&L is a tiny firm with limited resources. With proper funding from the industry giants, experts should be able to figure out which subsurface formations are susceptible to induced disturbances and which are not. Proper monitoring should also provide early alerts indicating when it's time to shut down a disposal well and move on. And although it would probably induce horror in litigation-averse corporate lawyers, stepping up to pay for any consequential, properly documented damages would be the responsible thing to do.

Once these costs are internalized, corporate auditors and risk managers could work to minimize potential liabilities in a variety of ways. These would include proper siting and operation, recycling, switching to alternative disposal methods, or any combination of these. Money talks, especially when it's your own funds that are at stake.

Fracking operators that generate wastewater have an absolute responsibility to dispose of it safely. If doing so costs a little more, then so be it, as those costs should be absorbed by the firms reaping the benefits. If the nation's energy producers get out in front of this problem-practicing a little Conscious Capitalism-they can not only do the right thing but may be able to protect their long term profits from the depredations of demagoguing politicians.

Energy industry executives need to act now. Why give anti-development Luddites, anti-corporate ideologues, and radical environmentalists another excuse to hamstring the development of America's oil and gas resources?