Could voluntary environmental audits on hydraulic fracturing operations bridge the gap between industry and environmentalists on performance standards? During today's OnPoint, Andrew Place, director of the Center for Sustainable Shale Development, discusses his group's plans for audits of shale developers and the impact these audits could have on the regulatory discussion.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Andrew Place, director of the Center for Sustainable Shale Development. Andrew, thank you for coming on the show.
Andrew Place: A pleasure to be here, thank you Monica.
Monica Trauzzi: Andrew, you are bringing environmentalists and industry together to set tighter performance standards for fracking. What is the core motivation behind the center? Give me some of the background of why it was created.
Andrew Place: The partnership came together in early 2011. I think it was a response to the polarization this industry has come to and a lot of issues thinking climate change or the Keystone XL pipeline. We tend to get easily into our camps and become entrenched in those positions. This group, if you look at who is at the table, on the environmental side, the Environmental Defense Fund, Clean Air Task Force, Penn Environmental Council, Shell, Chevron, Consol, EQT. I think all of them came to this thinking that we will fail to get the benefits and mitigate the risks if we don't have a conversation, some rational middle, the reasoned discourse in the middle and bridge this gap and this polarization.
Monica Trauzzi: Is the suggestion then that the government is not doing enough?
Andrew Place: No, I think it's very complementary to what the regulators are doing. We think about the same questions in many ways, but we operate in different spaces.
Monica Trauzzi: So you're going to be running voluntary environmental audits on fracking operations. Take me through the mechanics. Who is going to be running these audits? How is it going to be done? And how do you verify the information that you then find?
Andrew Place: Very good. Yes, we really look at two pieces. We built the standards collaboratively, broadly in that it is really fundamentally what's important here. I think a broad discourse across stakeholders in studying things like post-operations water monitoring or double-lined impoundments. So a series of very leading-edge practices. But there is an expectation in the public, and if you're going to make an argument that the operators are operating to these, you must have a very robust, independent piece. And we've brought in Bureau Veritas, which I view as a globally, well-known auditing firm. They do work on Sustainable Forestry Initiative and the Center for Offshore Safety, conflict diamonds for example. They bring the independents that have the technical expertise to do these audits not only a desk audit, and not only at the time of certification, but throughout the two-year period, the audits will be ongoing not only in desks but also in the field, boots on the ground to assure performance conformance to that, borrowing the phrase from Ronald Reagan, trust but verify. And that must be robust, frequent and intensive.
Monica Trauzzi: Participation is voluntary in terms of which companies will undergo these environmental audits. So then wouldn't companies that know they have a clean record participate and those who don't won't participate?
Andrew Place: Perhaps, we hope not. We also think that it drives the discourse and thinking about what I said in the introduction about bridging this gap, the need for this dialogue to be robust, to be broad stakeholder and to pull the conversation about what it means to have prudent development or the socialized stop rates. And we are already seeing that. The Allegheny counties and where Pittsburgh is, the county executive wanted to extract fuel, gas from underneath his county park. And he was very clever about it. He said non-surface lease. But if an operator is going to win this lease, they must operate to CSSD standards. So those indirect pull is I think an important part of this discussion.
Monica Trauzzi: Many environmental groups were initially critical of your group. Do you have a strategy for bridging the gap?
Andrew Place: Yes, and some of that was justified. We did this in pretty much a closed setting early on. I think it was smart to do that. It allowed us to build relationships across the spectrum. But the downside of that is that you do end up putting something out there that was somewhat isolated. And I think that was an unfortunate double-edged sword for the way we built it. But since we launched these standards in March, we've been doing outreach, and several if not many environmental organizations have come forward. They are interested, they are encouraging. And I think we are, especially since we launched the certification piece, that's where the proverbial beef is. I think you will see and you are already seeing a discourse discussion in the environmental section, that this isn't seen as an end run around regulation. It's complementary to regulation. And that's a good thing. And setting standards and obligating and working, it's a leading edge of practice, that has value across the board. And I think you are seeing that.
Monica Trauzzi: And are those environmental groups helping to ensure that the audits are aggressive on the environmental side?
Andrew Place: Yes, certainly the partnership. When we built the certification piece, we were very prescriptive on what the auditors must see, standard by standard, substandard by substandard. The intensity and frequency of field audits and so on. That's all transparent. That comes through Bureau Veritas. They have their own internal review process with power of veto. It comes to CSSD for further review. We have our own decision committee about certification which not only two of our board members are serving on, so is Sonny Popowsky, who was Pennsylvania's longtime consumer advocate, to bring the voice of the people into this. We have built layer upon layer of conformance, it's transparent, the final audit documents will be posted on our Web page. We will do summary reports on all the audits annually. So that should provide a very transparent, robust system that this is credible and cannot be gamed.
Monica Trauzzi: A new report by Ceres shows that a large portion of fracking activity is occurring in water-stressed areas. What are your center's standards regarding water?
Andrew Place: I saw this report came out of Ceres this morning focusing primarily in many of the high-risk places in South Texas and down in the Julesburg Basin in Colorado. And there are some issues around the Marcellus and Utica where we work; we're ring fence in the Appalachian Basin. You do have to think about time and which streams you're pulling from, time of year and flow rates and so on, to be careful you are not doing any damage. For us, we set a standard that I think is a leading industry standard of 90 percent minimum recycling. We are also requiring double-lined impoundments for water protection reasons. We also have standards for what's called area review to account for the unique risks around each one of these pads, both geographic and geological risks that again get at some of the broad questions about water protection and water risks. And if you look at our standards, we were thinking about the mitigating risk pathways, and Ceres was getting to this point. You've got to have a broad stakeholder engagement on these issues, and you've got to think about the unique granular cases. And we think we are clearly addressing those in the Appalachian Basin.
Monica Trauzzi: How would you assess the Obama administration's handling of fracking and shale development up until this point? The president made mention of natural gas and shale development in his State of the Union address. What is your assessment?
Andrew Place: Thinking about President Obama's point about shale zones, sustainability, that very much, we are one part of that. He was thinking broadly about the full economic drivers and environmental drivers. I think it's very much aligned with what we were thinking about, prudent choices, thinking about risk, thinking about mitigating risk, thinking about the dual imperatives and the secretary of Energy's advisory board thought about this and the National Petroleum Council thought about this as well as the International Energy Agency, the golden rules for golden age of gases; getting that duality that this has significant environmental potential uplift as well as economic uplift. But it must be done prudently. You cannot separate those two issues.
And thinking about what the president said in the State of the Union address, he's very much getting at that point, the balance between those two imperatives.
Monica Trauzzi: All right, Andrew. We will end it right there. Thank you for coming on the show.
Andrew Place: A pleasure. Thank you very much, Monica.
Monica Trauzzi: And thank you for watching. We will see you back here tomorrow.
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