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Who Pays the Cost of Fracking?

Weak Bonding Rules for Oil and Gas Drilling Leave the Public at Risk.

Authors: Tony Dutzik, Benjamin Davis and Tom Van Heeke from Frontier Group and John Rumpler from Environment America Research & Policy Center - 2013

Executive Summary

Fracking” operations pose a staggering array of threats to our environment and health – contaminating drinking water, harming the health of nearby residents, marring forests and landscapes, and contributing to global warming. Many of these damages from drilling have significant “dollars and cents” costs.

To the extent that this dirty drilling is allowed to continue, policymakers must require, among other things, that the oil and gas industry provide up front financial assurance commensurate with the potential for damage. By holding operators fully accountable, strong financial assurance requirements deter some of the riskiest practices and ensure that the industry, rather than the public, bears the brunt of the costs. Requiring such assurance up front – i.e., before drilling occurs – helps ensure that the public is not left holding the bag when the boom is gone and drilling operators have left the scene.

Unfortunately, current state and federal requirements for bonding or other financial assurance are wholly inadequate to protect the public.

  1. Financial assurance is not required for important impacts of fracking – Most states require financial assurance only for the costs of plugging a well and reclaiming the site – leaving no guarantee that funds will be available to fix environmental damage or compensate victims. States also generally do not require financial assurance to remain in place after a well has been plugged and the well site has been reclaimed, leaving the public at risk of having to pay for environmental damages that might emerge years or even decades later.
  2. Bonding levels are much too low – Only eight states require drillers to post bonds of $50,000 or more per well for plugging and reclamation at well

To the extent that this dirty drilling is allowed to continue, policymakers must require, among other things, that the oil and gas industry provide up front financial assurance commensurate with the potential for damage.


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