The US Environmental Protection Agency (EPA) often plays the enemy to oil and gas corporations. But a recently released report paves the way for fracking like no government document has before. Here's what you need to know.
Someone poisoned the water hole?
Fracking, or "hydraulic fracturing" as it's more formally known, is a process for extracting more oil and gas out of the earth. By pushing a mix of water, chemicals, and sand down into the ground, it increases the pressure and sends additional oil and gas up.
But most environmentalists have long believed that fracking is more sinister than a simple replacement process. From earthquakes to methane leaks to water table contamination, some think fracking gets away too easy on the environmental front.
But at least on water contamination, one of fracking's most controversial and damaging potential effects, this EPA report flags no foul. After an extensive analysis, the EPA reports that fracking "has not led to widespread, systematic impacts on drinking water resources."
In a press release statement, Dr. Thomas Burke, EPA's Science Advisor and Deputy Assistant Administrator of EPA's Office of Research and Development, noted that:
EPA's draft assessment will give state regulators, tribes and local communities and industry around the country a critical resource to identify how best to protect public health and their drinking water resources. It is the most complete compilation of scientific data to date, including over 950 sources of information, published papers, numerous technical reports, information from stakeholders and peer-reviewed EPA scientific reports.
But what about the flaming water?
As the video below shows, fracking does affect some water — and the EPA makes sure to caveat its findings, accordingly. But the Agency also notes that these instances were few and far between compared to the number of fracking operations, and that some of these instances have less to do with the fracking process and more to do with improper implementation.
To frack or not to frack?
Despite being the most comprehensive report to date, this assessment leaves regulators hanging on whether and how to regulate fracking. Instead, the EPA notes that its federal regulatory hands are often tied by exemptions in acts like the Clean Water Act, and calls on states to come to their own conclusions and regulations.
In effect, this is what's already being done. When the state of New York banned fracking in December 2014, it did it for a variety of public health reasons that extended far beyond water contamination, citing such adverse effects as boomtown communities' increased traffic and overcapacity medical care.
Currently, around 26 states have some form of local action against fracking, but the split is unsurprisingly split among those with natural gas assets and those without. New York is the only state with significant gas reserves to ban fracking, but unlike other natural gas guzzling states, it's never depended on fracking operations to support its tax base. For states like Pennsylvania, Ohio, and West Virginia and their more than 10,000 fracking wells, this latest report provides additional fodder to keep on fracking.
Foolish bottom line
The EPA's latest report is the most extensive review to date, and its findings are important. But as the Agency itself admits, fracking regulation will continue to occur at the state level, and each state's decision may be based as equally on political and financial interests as it is on environmental ones.
For fracking investors, this isn't a green light — but it does make red lights seem more baseless. Regardless, when regulatory measures are involved in an investing thesis, it's important to keep a keen eye on what Uncle Sam says. A report like this can be as damaging as it is darling and, if the reaction by some states and civil societies is any indication, the fracking fight is far from over.