The precautionary principle and the science behind the New York hydraulic fracturing ban

Last week’s decision by New York Governor Andrew Cuomo to ban high volume hydraulic fracturing for shale gas development has sent shock waves throughout the country. It is the first time a state government has issued a ban on fracking based on the recognition that there is no proof that fracking is safe for its residents.

Governor Andrew Cuomo

Governor Andrew Cuomo

The implications are substantial, ranging from the economic impact on the oil and gas industry and on individuals to the public health impacts of fracking to public attitudes regarding the safety of fracking.

Substantial scientific work underlies Governor Cuomo’s decision. Last week three important studies were released on the public health impacts fracking. I’ve posted them here and recommend that you read them if you’re really interested in understanding the state of scientific evidence on fracking and health.

A political decision based on the precautionary principle
But it’s very important to understand that there is still no “smoking gun” linking fracking to negative health impacts. Governor Cuomo’s decision was less a scientific decision than a political one.

You might recall that a couple of months ago I wrote about the “precautionary principle,” which says that if an action is suspected of causing harm to the environment or human health, then, in the absence of scientific consensus, the burden of proof falls on the individual or organization taking the action.

The precautionary principle underlies the conflict between the oil and gas industry and local citizens in every community where fracking exists or is planned. Citizens believe there is ample evidence that suggests fracking causes health problems and should be banned or strictly regulated. The oil and gas industry rejects the principle, demanding proof beyond a shadow of a doubt that fracking is harmful before regulation should take place. They fight tooth and nail against any regulation of their industry, and have succeeded in creating significant exemptions in most federal environmental legislation.

Dr. Howard Zucker

Dr. Howard Zucker

So what Governor Cuomo did in New York, supported by a thorough review of scientific evidence, was act on the precautionary principle. As Dr. Howard Zucker, New York’s Acting Commissioner of the Department of Health, put it:

“I have considered all of the data and find significant questions and risks to public health which as of yet are unanswered. I think it would be reckless to proceed in New York until more authoritative research is done. I asked myself, ‘would I let my family live in a community with fracking?’ The answer is no. I therefore cannot recommend anyone else’s family to live in such a community either.”

What the scientific evidence says
But the fact that there is no smoking gun does not mean the scientific evidence isn’t compelling. It is. We have been reporting on this evidence on this site for a year, and the implications of the research are powerful.

Last week three reviews of scientific research on the health impacts of fracking were released in New York.

Click to read the full study

Click to read the full study

New York Department of Health review
The first was a public health review of the public health impacts of high volume hydraulic fracturing (HVHF) conducted by the New York Department of Public Health. This document was informed by the other two reviews, which are discussed below.

You can read the Department of Helath review by clicking on the graphic at right.

The study itself invokes the precautionary principle:

“As with most complex human activities in modern societies, absolute scientific certainty regarding the relative contributions of positive and negative impacts of HVHF on public health is unlikely to ever be attained. In this instance, however, the overall weight of the evidence from the cumulative body of information contained in this Public Health Review demonstrates that there are significant uncertainties about the kinds of adverse health outcomes that may be associated with HVHF, the likelihood of the occurrence of adverse health outcomes, and the effectiveness of some of the mitigation measures in reducing or preventing environmental impacts which could adversely affect public health. Until the science provides sufficient information to determine the level of risk to
public health from HVHF to all New Yorkers and whether the risks can be adequately managed, DOH recommends that HVHF should not proceed in New York State.”

The review found enough evidence to say that all of the following are “potentially associated” with HVHF:

  • Air impacts that could affect respiratory health due to increased levels of
    particulate matter, diesel exhaust, or volatile organic chemicals.
  • Climate change impacts due to methane and other volatile organic chemical
    releases to the atmosphere.
  • Drinking water impacts from underground migration of methane and/or fracking
    chemicals associated with faulty well construction.
  • Surface spills potentially resulting in soil and water contamination.
  • Surface-water contamination resulting from inadequate wastewater treatment.
  • Earthquakes induced during fracturing.
  • Community impacts associated with boom-town economic effects such as
    increased vehicle traffic, road damage, noise, odor complaints, increased demand for housing, and medical care, and stress

You can search on all these topics on this blog and find extensive evidence that documents their relationship to oil and gas drilling.

Click to download complete study

Click to download complete study

Physicians, Scientists and Engineers Healthy Energy Literature Review
The second literature review published last week was an analysis of peer-reviewed scientific research on the health impacts of fracking by PSE Healthy Energy, a collaborative of science professionals that provides a multi-disciplinary approach to identifying “reasonable, healthy, and sustainable energy options for everyone.”

  • 96% of all papers published on health impacts indicate potential risks or adverse health outcomes.
  • 87% of original research studies published on health outcomes indicate potential risks or adverse health outcomes.
  • 95% of all original research studies on air quality indicate elevated concentrations of air pollutants.
  • 72% of original research studies on water quality indicate potential, positive association, or actual incidence of water contamination.
  • There is an ongoing expansion in the number of peer-reviewed publications on the impacts of shale and tight gas development: approximately 73% of all available scientific peer-reviewed papers have been published in the past 24 months, with a current average of one paper published each day.

Now go back and look at these percentages. There may be no smoking gun, but the evidence is extremely compelling.

Click to download compendium

Click to download compendium

Concerned Health Professionals of New York Compendium
The third study released last week is the second compendium of scientific and medical findings by an alliance of health professionals called the Concerned Health Professionals of New York.

You can download the compendium by clicking on the graphic at right. We reported on the first compendium here.

The compendium provides a list of studies that demonstrate many health issues related to fracking, including

  • Air pollution
  • Water contamination
  • Inherent engineering problems that worsen with time
  • Radioactive releases
  • Occupational health and safety hazards
  • Noise pollution, light pollution, and stress
  • Earthquake and seismic activity
  • Abandoned and active oil and natural gas wells as pathways for gas and fluid
  • Flood risks
  • Threats to agriculture and soil quality
  • Threats to the climate system
  • Inaccurate jobs claims, increased crime rates, and threats to property value and
  • Inflated estimates of oil and gas reserves and profitability
  • Serious risk to investors

You can go to the compendium and see a list of studies that document each of these issues.


The oil and gas industry loves to portray those of us who have concerns about fracking as wide-eyed idealists who have no understanding of how their industry work. The science tells you otherwise.

PSE Database of scientific studies, grouped by topic
First compendium of Alliance of New York Health Professionals
Posts on this blog about the health impacts of oil and gas drilling

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Breaking: Governor Cuomo to ban high volume fracking of shale for methane in New York

This came over the wire as a news alert a few minutes ago:

The Cuomo administration announced Wednesday that it would ban hydraulic fracturing in New York State, ending years of uncertainty by concluding that the controversial method of extracting oil from deep underground could contaminate the state’s air and water and pose inestimable public-health risks.
“I cannot support high volume hydraulic fracturing in the great state of New York,” said Howard Zucker, the acting commissioner of health.
That conclusion was delivered publicly during a year-end cabinet meeting called by Gov. Andrew M. Cuomo in Albany. It came amid increased calls by environmentalists to ban fracking, which uses water and chemicals to release natural gas trapped in deeply buried shale deposits.
The state has had a de facto ban on the procedure for more than five years, predating Mr. Cuomo’s first term. The decision also came as oil and gas prices continued to fall in many places around the country, in part because of surging American oil production, as fracking boosted output.

Correction, 12/17, 2014: It has been pointed out to me that this is not a complete ban on hydraulic fracturing, but a ban on “high-volume,” or “massive” hydraulic fracturing of shale for methane. The definition of high-volume hydraulic fracturing varies somewhat, but it is generally defined as “treatments injecting greater than about 150 short tons, or approximately 300,000 pounds (136 metric tonnes), of proppant.

I have changed the headline to make it more accurate.

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Video from Carbon County Commissioners meeting, December 15, 2014

Here is the video from yesterday’s Carbon County Commissioners meeting. I’ll have some comments later, but here it is for those eager to see it.

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Exciting news from Carbon County: Commissioners move forward on Silvertip Zone; ECA vacates Belfry well (for now)

At a well-attended meeting in Red Lodge this morning, the Carbon County Commissioners voted to move forward to create Silvertip Zone in Belfry. The Commissioners agreed that the zone is “in the public interest and convenience for public health, safety and welfare, and for the public infrastructure.”

This big step forward marks a significant benchmark in the process of creating the zone, which has been in the works for months, and has been discussed in many public forums. Here are the steps in creating a citizen-initiated zone, as set forth in Montana law in MCA 76-2-101:

  • Any interested group of citizens in a county can create a zone. It is a democratic process. If 60% of the residents in an area want to create the zone, it can be brought forward to the County Commission.
  • The rules of the zone must be drafted to be consistent with the county growth plan.
  • A zone map must be created to reflect the properties to be included in the zone and define the perimeter of the zone
  • Each landowner who supports the district needs to sign a petition. The signature must match exactly the name on the title of the land.
  • When more than 60% of the landowners in the district have signed the petition, it can be brought to the County Commission.
  • After the County Commission receives the petitions, it holds a public meeting to determine whether the zone is in the “public interest and convenience.” If so, the district is established.
  • If the zone is established it is referred to a county planning and zoning commission. This is a seven member oversight board that reviews the zoning petition and recommends how it should be implemented.
  • After opportunities for public input, the planning and zoning commission puts in place the regulations for the district.
  • The planning and zoning commission is responsible for the ongoing administration of the district.

There is still much work to be done before the Silvertip Zone becomes a reality. The County will publish an “intent to create the district,” which gives any landowners within the Silvertip Zone 30 days to protest to the Commissioners. Several residents appeared at the meeting and indicated a desire to protest.

However, according to attorneys representing the Silvertip Zone, such protests are not allowed by Montana law. 68% of the landowners within the Silvertip Zone signed the petition to create the Zone.

Click to read full letter.
Click to read full letter.

ECA pulls out of Belfry well
Energy Corporation of America sent a letter to the Carbon County Commissioners last week indicating they have “determine(d) that this well is not a good candidate for further development for ECA. Therefore, we do not have plans to further develop this well, or pursue additional wells in the area at this time.”

While the letter is welcome news in the short term, Silvertip resident Bonnie Martinell was quick to point out, “The letter is irrelevant to our concerns. What the Silvertip landowners want to do in establishing this zone is protect our property and livelihoods for the long term. All ECA says is they’ve stopped operations “at this time.” Unless we set up this zone, ECA or another operator might be back at some point in the future.”

More to come on this. I’ll post the video of the meeting, which went on for about two and a half hours, as soon as it is uploaded.

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Lawrence VanDyke resurfaces in Nevada, and reminder to attend key meetings this week

One more election follow up:

Lawrence VanDyke, the Montana Solicitor General who opposed Montana Supreme Court Justice Mike Wheat in last month’s election, has left the state and resurfaced as the new Nevada Solicitor General.

You’ll recall that VanDyke, who has little courtroom experience, none in Montana, was supported by massive donations from out of state corporate interests in his bid to unseat Wheat.

Lawrence VanDyke campaign mailer

Lawrence VanDyke campaign mailer

While most of the press on these donations has focused on VanDyke’s affiliation with the Alliance for Defending Freedom and its religious right agenda, readers of this blog were also concerned that his funders included a number of energy firms.

It’s no coincidence that Nevada is working its way through the regulatory process for fracking.

The Montana Supreme Court stands as a steward of the environment, and it is critical to retain judges who will not serve a political agenda. Since Citizens United, corporate influence is the new normal for Supreme Court elections. Montana voters should congratulate themselves that they made the right choice to protect the State’s water, air and way of life.

Lawrence VanDyke is now Nevada’s problem.


Three things you can do personally to support responsible oil and gas drilling along the Beartooth Front:

1. Monday, 9am: Carbon County Commissioners meeting: The Commissioners will be giving their response to the revised Silvertip Zone petition. It’s important to be there to support this effort by Belfry landowners.

2. Tuesday, 7pm: Carbon County Growth Plan meeting. The Growth Plan is a five year plan that will be approved by the County Commissioners in January. The plan will inform policy, so it is critical for Carbon County residents to have a voice in is contents.

3. Comment on the Carbon County Growth Plan. If you are a County resident and you can’t make the meeting, or if you want to provide detailed comments, you can provide input by sending an email with your comments to:

For more information, click here.


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Your help needed: attend two important meetings next week; a chance to influence Carbon County Growth Policy

Here are three things you can do personally over the next week that will make a difference in Carbon County. Don’t pass on these — your involvement will make a difference.

1. Please attend: Commissioners response to Silvertip Zone petition
Monday, December 15, 9:00am.
Carbon County Commissioners meeting.
County Administration Building
17 West 11th Street
Red Lodge

The Carbon County Commissioners will be responding to the most recent petition from landowners in the Silvertip Zone in Belfry. When approved, the petition will set up a planning and zoning committee that will consider rules for oil drilling within the zone.

Your attendance will demonstrate support for the Silvertip residents, who seek to protect their personal property and livelihoods. Please come if you can.

To find out more:
Background on the Silvertip Zone
About citizen initiated zoning
Silvertip Zone FAQ

2. Please attend: Carbon County Growth Policy meeting
Tuesday, December 16, 7:00pm
Carbon County Courthouse
102 North Broadway
Red Lodge

Carbon County is in the final phase of updating its growth policy. This is the first update since 2009. The meeting represents a last opportunity for public input into the plan, which is expected to be adopted by the County Commissioners next month. This meeting is a reschedule of the November 25 meeting.

This plan will be in place for the next five years, and will influence regulation of oil and gas drilling, the protection of water, air and soil; the protection of property rights and the long-term economic viability of the County.

Carbon County Growth PlanYou can download the current draft of the 2014 Growth Policy by clicking on the graphic at right. The document is great reading – well crafted and full of information about the history, land, economy and people of Carbon County. You’ll find plenty of charts, graphs and maps that depict the history and current state of the County.

I recommend you read through it before the meeting and consider giving input on areas that you think are important.

Attending the meeting is important because the Growth Plan informs policy direction for five years. If you come and give your point of view, you can affect the final content of the Plan.

3. Provide comments for County Growth Policy
If you are a County resident and you can’t make the meeting, or if you want to provide detailed comments, you can provide input by sending an email with your comments to:

Some important points you may want to consider making:

  • One of the five key goals in the growth plan is to “develop the county’s natural resources balancing economic development with environmental responsibility (p. 52).” Key objectives for achieving this goal are to “promote policies and strategies to mitigate potential impacts without deterring natural resource development.” Ways to do this include:
    • Coordinate with landowners to enable citizen-initiated zoning districts (enabled through MCA 76-2-101) to mitigate potential impacts of natural resource development.
    • Consider possible impact mitigation policies in the development regulations.
    • Coordinate with industry, landowners and local leaders to promote “good neighbor” strategies.
  • Objectives could also be added to strengthen this section. Examples might include:
    • Acquisition of baseline data on air, water and soil quality in areas that are to be developed, and development of programs to mitigate any contamination or erosion of quality
    • The inclusion of the right specifically stated in the Montana Constitution to a clean and healthful environment in Carbon County.
Growth plan, public_private
From the Growth Plan: Public and private land in Carbon County. Click to enlarge
  • If you read pp. 57-60 of the plan, a process for review is explained for any change of use in land — from  agricultural, residential, or recreational to commercial or industrial. The review must cover agriculture, water use facilities, local services, natural environment, wildlife habitat, and public health and safety. Every time a landowner wants to subdivide in a way that means a change of use, these criteria must be considered. However, if the change is to natural resources development, all regulation moves to the state level, with no County requirement for involvement. As we have often explained, the State does not concern itself with these areas of review. The County should apply these same standards of review for land converted to oil and gas development in the growth plan.
  • The importance of maintaining tourism in the County, and making sure that any oil and gas development is done within the context of not allowing a conflict that would lead to an environment inhospitable to tourism. While tourism is mentioned in the growth plan, its essential importance to the County is underplayed, and the potential for conflict between tourism and the heavy industry of oil and gas development is not emphasized.


Current (2009) Carbon County Growth Policy
Carbon County Growth Policy Web Site
The Economy of Carbon County, 2012

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A personal story: Cathy McMullen, Denton Texas

Cathy McMullen, Denton Texas
We’ve talked about the Denton, Texas fracking ban and its legal aftermath. Today we have the personal story of Cathy McMullen, the local citizen who led the fight.

This is one of a series of personal stories told on this site. You can find others by clicking here.

Cathy McMullen at a Denton City Council meeting. Click to enlarge.

Cathy McMullen at a Denton City Council meeting. Click to enlarge.

McMullen’s story is an inspiring one, and it  should help County Commissioners in Carbon and Stillwater Counties understand the importance of listening to local citizens who seek nothing more than to protect their property rights and their way of life.

According to the Guardian, “the oil and gas companies probably would be fracking still in Denton if they had not completely dismissed McMullen’s concerns.”

“They underestimated us completely,” McMullen said. “I think they all just thought: ‘Oh, it’s just Cathy.’ I don’t think they saw the storm clouds on the horizon, and that industry was creating this storm, and that it was going to blow into town, and everybody was just sick of it.”

Lined up against the power of the oil and gas industry, it’s probably pretty easy to underestimate McMullen, a 56-year-old home help nurse. She’s not political, and didn’t even register to vote until a few years ago.

Move to Denton, 2009
She moved to Denton with her husband in June, 2009 to escape drilling in nearby Wise County, the birthplace of fracking and the home of Bob and Lisa Parr, whose personal story we told last April. At that time a well was going in on the fence line of McMullen’s former home on 11 acres.

McMullen was not knowledgeable about fracking. What she was looking for was a safe place to live, and the century-old farmhouse she found in Denton seemed like a perfect place for her growing collection of rescue animals, which now includes five dogs and a cat.

“I am ashamed to say I was one of those apathetic people who are blind to what’s going on,” she says. She doesn’t have strong views about the oil and gas industry, she just believes that local people should have personal property rights that can’t be taken over by drilling.

But when you run away from fracking, fracking often follows in hot pursuit.They had been in their new house for just a few days when a familiar marker went up in a nearby field – a row of five posts with pink plastic flags. “I knew they intended to put wells there,” she said. “My heart sank.”

Her husband suggested they leave, but McMullen says she told him, “If we run now, we’re going to be running forever. If we stay in Texas, we just decide to stay and fight it’.” And fight she has, for the last five years.

Attempts at change
The first thing she tried to do was convince Range Resources, the operator, to move the wells from one end of the field to the other, away from a hospital and a school. They refused, so she talked to the mayor. He told her to let it go. The wells went in. It’s a familiar story from many parts of the country, but McMullen had no say because she owned only the surface rights to her property.

She raised $3,700 from her neighbors for air quality monitors, and for water and soil samples. She kept a log of the smells coming off the well.

Click to enlarge.

McMullen next to a well. Click to enlarge.

She refused to quit. “I think that was the thing that just kept me going all these years: who the hell do they think they are? By any stretch of the imagination, why is it OK to allow heavy industrial use right close to a hospital and a playground? From the wellhead to a swing set was 536 feet.”

New regulations
A year later, the city council began to work on a new set of regulations for fracking in the city limits, and McMullen was invited to participate on the committee that was working on this. She was a voice in the wilderness, at many meetings the only member of the group who voiced concerns about fracking.

“They were dismissive. They were very paternal. They were: look, we know you kids don’t understand this, but we are doing this for your own good,” she said. “They were disrespectful.”

New regulations were adopted in early 2013. While some restrictions were placed on fracking, McMullen felt they were just a drop in the bucket. According to the Guardian, “industry did not feel bound even by those relatively light restrictions. Soon after the ordinance came in, oil drillers began to frack two wells near a new suburban development, which is full of young families. McMullen (was) horrified – and so were the local residents.”

As the wells went in, the stench in the new neighborhood got people angry enough to take action. McMullen decided it was time to press for a fracking ban. It was a pipe dream. It had never happened in Texas before, but McMullen felt there was no choice because there was no support from local regulators to make substantive change.

“They figured…we wouldn’t get the signatures”
“Nobody took us seriously at first,” she remembers, “because nobody has really challenged them in the state of Texas. They figured we would be squashed. We wouldn’t get the signatures.”

She found a lawyer, who is not willing to share his name, and wrote a ballot initiative. The wording of the measure specifically banned fracking – not drilling – a tactic intended to show that opponents were not against all industry activity, McMullen said.

Cathy McMullen debating prior to the election. Click to enlarge.

McMullen debating prior to the election. Click to enlarge.

When the measure was put to a vote at the city council last July, nearly 600 people spoke up in support of the ban. The city council, in a significant tactical blunder, voted against a ban. However, the measure did go to the ballot last month.

The campaign was brutal. The oil industry used every bit of its resources to fight the ban, putting up money and recruiting a former mayor and university officials to be the spokespeople for fracking. They tied a loss of fracking revenue to school quality, arguing that a ban would hurt the schools. Flyers circulated reading, “Denton moms oppose drilling ban.”

The fight was so contentious that McMullen was assigned police protection. She got death threats. She recalls, “In one of the Facebook posts, the guy was hoping that so many people would be so mad at us they would put us on a stick and burn us – and he would get to light the match.”

But the town had had enough. Even though the campaign was underfunded, there were hundreds of volunteers going door to door, hosting barbecues, even organizing a free concert in the town square.

The ban passed 59-41. In the end, McMullen and a small group of mostly women had beaten the oil and gas industry. “I would rather be underestimated than overestimated,” she says. “If people don’t think you are going to be a challenge to them, you can fly under the radar and do what you need to do.”

Similarities to Carbon County
Many elements of Cathy McMullen’s story should sound familiar to us along the Beartooth Front.

  • In Carbon County, a small group of landowners from the Silvertip area have banded together to put forward a citizen initiated zoning petition. State law allows them to do this, they have met every requirement imposed by the County Attorney, and the County is currently building support for citizen initiated zoning into its growth plan, which has gone through extensive community process and is scheduled to be approved next month. As in Denton, they are local people petitioning for the rights given to them by state law.
  • Like Denton, Carbon County is not a hotbed of liberal environmentalism. Denton is Tea Party country. Denton voted for Romney 65-33 in 2012; Carbon County voted for Romney 60-36. What is clearly true in Denton is also true in Carbon County: this isn’t a traditional partisan issue. Voters respect property rights, and they don’t want oil companies to be able to do whatever they want on private land without permission from surface owners. They care about their way of life, and don’t want it ruined by unregulated drilling.
  • In both Denton and Carbon County, residents do not oppose all oil and gas drilling. The Denton ordinance banned fracking, not conventional drilling. The Silvertip Zone wouldn’t ban drilling, but would set the conditions under which drilling should occur.
  • Like Cathy McMullen, the Silvertip residents may be underestimated by local elected officials. In the video below, shot at the August 18 meeting in which Silvertip residents presented their zoning petition, listen to County Commissioner Doug Tucker at 50:16 in this video (transcription is mine, so please forgive and correct errors):

Tucker: “When you state farmers and ranchers, and I’ve followed your articles and stuff with Northern Plains Resource Council, I think that we need to identify first of all, there’s a difference between possibly the farmers and ranchers that you’re stating. When I think of a rancher in the Clark Fork Valley, I think of the large scale ones: the Herdons, the Petersons, the Hergenriders, versus the smaller ones. I’m not saying they should be separated, but I know that when you talk about farmers and ranchers, and I’ve read many of your articles Deb, that state ‘all the farmers and ranchers over there,’ yet when I go over and speak with the farmers and ranchers  that I’m thinking in my mind the farmers and ranchers are the ones that are doing most of the ag farming, they’re not on board with what the Northern Plains Resource Council is proposing. So I think there’s a little bit of a difference because when I look at these people here, I know the Nashes have a small operation there, I’m very aware of that, but I’m also noticing, I mean, I don’t know everybody here obviously, but, as far as the farming and ranching community,  I don’t see the Hoskins here. I know that somebody spoke on behalf of them, but they’re large scale farmers. Herdons, large scale farmers, Petersons, Aisenbreys…”

The message is clear — even though the farmers and ranchers who have petitioned to form the Silvertip Zone have complied with the legal requirements for zone size, and percentage of owners signing, in Tucker’s mind this group is less relevant than larger ranchers. The smaller property owners somehow are less important.

The beauty of a citizen initiated zone is that it affects only the landowners in the zoned area. It is a way for individuals to protect their property rights, and it doesn’t keep others from exercising their rights as they see fit. The farmers and ranchers in the Silvertip Zone have complied with the legal requirements for forming a citizen initiated zone, and have done so in accordance with the County Growth Plan.

The lesson of Denton should not be lost on the Carbon County Commissioners. They can support their constituents who are acting within the law to protect their property as they see fit, or they can ignore these Carbon County voters and cast their lot with Energy Corporation of America and their Super Lawyer Mike Dockery.

Like Cathy McMullen and the citizens of Denton, the Silvertip landowners are not going away. They should not be underestimated.


Statement of Cathy McMullen after Denton fracking ban passed.
Cathy McMullen interview, 12/1/2014:

Posted in Community Organization, Politics and History, Uncategorized | Tagged , , , , , , | 2 Comments

Oil prices continue to fall: why it is happening and what it means

Red Lodge gas_120214Cheap gas
The price of gas continues to fall. Three weeks ago I noted that gas was at $2.99 in Colum- bus and Red Lodge, and speculated on what falling oil prices might mean to oil drilling along the Beartooth Front.

Today the price of gas in Red Lodge is down to $2.77, and the price of oil on international markets has plummeted to about $70 a barrel, down over 40% in five months.

Let’s look at why this is happening from an international perspective, and consider what this continued decline in oil prices might mean to the possibility of expanded drilling in Carbon and Stillwater Counties.

A decade-long increase in oil prices
A decade ago oil was about $40 a barrel, but prices begin to increase sharply because of increases in global demand, particularly from China, where industrialization and economic growth were increasing quickly. This increase in demand caused oil prices to spike. Prices rose to about $100 per barrel and held there from about 2011 to 2014.

The Shale Boom
At that price it became very profitable to start extracting oil from places where production costs were higher. This led to fracking and horizontal drilling in the shale fields of North Dakota and Texas. The increase in production in the United States was dramatic – about four million barrels of crude a day since 2008, on a base of 75 million per day worldwide.

This increase in supply did not lead to a corresponding drop in price, because at the same time the supply from other oil producing areas declined due to political conflicts: the civil war in Libya, the continued unrest in Iraq, sanctions on Iran by the US and Europe. These conflicts reduced oil production from the rest of the world by about three million barrels a day. The market share for US oil increased, but overall global production stayed about the same.

oil prices_120214Why prices are dropping today
Things began to change this fall. Global political disruptions began to ease, particularly in Libya. Demand for oil in China, Japan, Germany and elsewhere in Asia and Europe began to decline.

With demand weaker and an increasing supply, oil prices began to drop from a high of $115 per barrel in June to $80 in mid-November. In the last two weeks prices have plummeted to about $70 today.

The most recent decline was caused by a meeting of the Organization of Petroleum Exporting Countries (OPEC) on November 27. OPEC is a cartel that produces 40% of the world’s oil. The sheer size of the organization and the willingness of its member countries to expand or contract production in unison gives it tremendous power over oil prices.

At the November meeting OPEC members were split on what course of action to take. Venezuela and Iran tried to convince membership to cut back on production to increase the price of oil. Saudi Arabia opposed cutbacks because it feared loss of market share.

The compromise was to leave production unchanged. “We will produce 30 million barrels a day for the next 6 months, and we will watch to see how the market behaves,” said OPEC Secretary-General Abdalla El-Badri after the meeting.

According to Brad Plumer of Vox:

“For all intents and purposes, OPEC is now engaged in a “price war” with the United States. What that means is that it’s very cheap to pump oil out of places like Saudi Arabia and Kuwait. But it’s more expensive to extract oil from shale formations in places like Texas and North Dakota. So as the price of oil keeps falling, some US producers may become unprofitable and go out of business. The result? Oil prices will stabilize and OPEC maintains its market share.”

New York Times photo.

New York Times photo.

What it means for us
The impact on oil production in the United States is not easy to determine. According to the International Energy Agency, about 4 percent of US shale projects need a price higher than $80 per barrel to stay afloat. But many projects in North Dakota’s Bakken formation are profitable so long as prices are above $42 per barrel, or as low as $28 in McKenzie County.

However, as has often been said, the Beartooth Front is not the Bakken. Production in Belfry and Roscoe is not expected to match the rich reserves in the Bakken Shale, which means that at $70 a barrel there is no real incentive for Energy Corporation of America (ECA) to rush to pull oil out of the ground. In the short term, low oil prices will probably slow down ECA and its plans to “bring a little bit of the Bakken” to the Beartooths.

In the longer term, it’s anyone’s guess. The world is a complex place. There are many levers that influence the price of oil: economic growth in Europe and Asia may continue to slow demand, geopolitical conflicts may increase or not, and OPEC may decide to cut production to prop up prices.

For people who care about the future of the Beartooth Front, the low price of oil creates an opportunity to work with County Commissioners to put regulation in place to make sure that when economic conditions make it profitable to pull oil out of the ground it is done in a way that protects the long-term future of the area.

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Denton, Texas lawsuit: lessons for the Beartooth Front

You’ll recall that the voters of Denton, Texas passed a fracking ban on election day. The 59-41 victory was remarkable because it made Denton the first city in the largest oil and gas producing state in the country to pass such a ban.

It will probably come as no surprise to you that, as soon as the election results were announced, the Texas Oil and Gas Association filed a lawsuit to stop Denton’s efforts to control drilling.

The premise of the industry association lawsuit is that the ban exceeds the limited power of home-rule cities and intrudes on the authority of several state agencies, particularly the Texas Railroad Commission, which regulates the oil and gas industry.

Click to view full letter

Click to view full letter

This argument should sound familiar. It’s very similar to the one put forward by Energy Corporation of America attorney Mike Dockery with regard to the Montana Board of Oil and Gas Conservation in a letter to the Carbon County Commissioners last September.

In the letter he argues, with regard to the proposed Silvertip citizen-initiated zone, that

“Any proposed rules and regulations that control the activities within the proposed Zoning District unlawfully usurp the jurisdiction and authority of the Board (of Oil and Gas Conservation) to issue oil and gas permits and regulate the activities related thereto.”

Dockery and ECA are telegraphing their intention. The company has no desire to work with Silvertip residents as good neighbors. They want their oil and they’re going to go to court to get it if they need to.

Cathy McMullen, Denton Drilling Awareness Group

Cathy McMullen, Denton Drilling Awareness Group

But local residents should take a cue from the Denton Drilling Awareness Group, which led the grass roots effort to get the fracking ban passed. Cathy McMullen, leader of the group, said they plan to be an intervenor in lawsuits filed to challenge the ban passed by voters November 4. She said the group will be helped by attorneys with various areas of expertise, something they plan to announce this week.

“It’s a group of high-powered attorneys familiar with these kind of cases,” McMullen said. Hiring the attorneys frees up the group’s volunteers for “the politics of this.”

According to McMullen, the Denton Drilling Awareness Group plans to go to Austin when the Legislature reconvenes after the first of the year. Several lawmakers, including state Rep. Phil King, say they are prepared to offer legislation banning the ban.

The lessons coming to us from Texas are clear:

  • The oil and gas industry has no interest in working with local residents to find a compromise that meets the needs of local landowners. This puts them in distinct contrast to the Stillwater Mine, which has agreed to a binding Good Neighbor Agreement in Stillwater County. Drillers will sue to get what they want. Dockery’s letter comes right out of the industry playbook and should come as no surprise.
  • Local residents should not shy from a fight. Expert legal help is available, some of it pro bono, and funds can be raised to pay for challenges to the oil and gas industry. The work of Helen Slottje, who recently spoke in Billings, is a prime example.
  • The fight is not just about a single zone in Carbon County. As the Denton group shows us, the fight will likely be extended to the legislature, and to reform of agencies such as the Board of Oil and Gas.

Keep in mind that the Silvertip landowners are not proposing a ban. They’re just exercising rights stipulated in Montana law to control how their land is used.

The Silvertip Zone is important work, and what’s important is worth fighting for.

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Planning Board meeting tonight canceled

NOTE: The Carbon County Planning Board meeting scheduled for tonight has been postponed due to weather and lack of a quorum. It has been rescheduled for December 16.

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