Report: In bitter energy debate, nobody wins

HOUSTON — When environmentalists and oil and gas industry supporters go to extremes, it’s the American worker who loses, according a report by the Harvard Business School and the Boston Consulting Group.

A toxic discourse on energy — disconnected from facts and polarized both by environmentalists who exaggerate risks and pro-industry groups who ignore legitimate concerns — is confusing the public and jeopardizing the much-needed economic benefits responsible development of unconventional resources could bring the U.S., authors said.

“You have people on the extremes holding people back from compromising,” said David Gee, partner at the Boston Consulting Group and an author of the report. “It’s symptomatic of a lot of the gridlock in the broader country.”

And despite the vitriol on both sides, neither group is winning, Gee said.

Unconventional drillers and the oil and gas industry have seen public support for hydraulic fracturing slipping. Fracturing is a key part of shale drilling that pumps fluid into the rock at high pressure to release oil and gas. The process has boosted the U.S. economy and revived U.S. oil and gas production, but environmental groups have attacked the process for everything from allegedly contaminating groundwater to increasing dependence carbon-emitting fossil fuels.

The report cites polling that shows a 7 percent decline (from 48 percent to 41 percent) in the number of Americans who support fracturing during March 2014 to November 2014. During the same period, those opposed to fracturing rose from 38 percent to 47 percent. Aside from slipping support, New York Governor Andrew Cuomo banned fracturing in his state in December of 2014, and Maryland placed a 30-month ban on the process in April. Last year, voters in Denton, Texas approved a short-lived local ban on the practice.

But while fracturing support has slipped, environmentalists haven’t fully achieved their goals either. Drillers have made progress on meeting rules, but regulators remain starved for resources and compliance is often uneven among producers. Drillers often fight regulations that would have a small cost impact because they fear changes today are simply used to ratchet to a higher standard later, Gee said.

The main result of the polarized discussion has been to put one of the few vibrant areas of the American economy at risk, the report finds. The report is part of a larger study of American competitiveness, which the authors report has been eroding due to a number of factors such as political gridlock, struggling K-12 education and a complex tax code. The energy sector is one of the major brights spots for the U.S., according to the study.

“This is an industry that’s 50 -100 percent larger than the auto industry… that could be one of few needle movers for American competitiveness,” Gee said.

The report pointed to several benefits of developing unconventional oil and gas resources, such as $800 in per household annual savings from lower energy costs, a revitalized manufacturing sector and lower carbon emissions from burning natural gas.

The solution the Harvard Business School and Boston Consulting Group recommend was a fact-based discussion focused more on compromise than on extreme statements.

“Hopefully if you can get enough people moving toward the middle, you can marginalize the people on the extremes,” Gee said. “Right now the perfect is the enemy of the good.”

 

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