Podcast Ep 4: Fracking and the opaque transparency of self-regulation

Andy

Good morning, everyone. Welcome to Consumer Pod Index. My name is Andy Grabia. With us today is Joel Gehman, Winspear Associate Professor of Business, Associate Professor of Strategic Management and Organization, and Associate Director of the Canadian Centre for Corporate Social Responsibility here at the University of Alberta. Joel has a new paper out looking at fracking, a hot topic here in Alberta, but also throughout North America, not only because of the newness of the practice, but the unknowns around the environmental consequences of such activity. In fact, if you are from Alberta, you'll know that the Alberta energy regulator shut down a fracking well in March because it actually caused an earthquake in central Alberta, which is if you know, Alberta is very rare. We don't have a lot of seismic activity here. So just wanted to give some background to that and welcome you today, Joel, how are you doing?

Joel

I'm great. Thanks, Andy. It's great to be here.

Andy 

Perfect. So before we get into the scope and findings of your paper, let's just get really basic: can you tell us what fracking is?

Joel

Sure. Fracking is a technology that's been used by the oil and gas industry for more than half a century now. So it dates back to the 1950s. And it's a set of technologies that's used to produce oil and gas. The reason we're talking about it today, however, is because it's begun to be used in a new way to get to these unconventional shale formations as they're called. Okay. And they're doing them on much larger scales than they used to do.

Andy  

Perfect. And so it's still mostly in the United States, right? There's not as much as here as there is going on sort of in the US, is that correct?

Joel

Certainly, in terms of the number of wells in the United States, it's in the hundreds of 1000s. Here in the western Canada region, it's primarily in BC and Alberta, and we still have, you know, sort of in the 10s of 1000s of wells.

Andy 

Okay. And so what are some of the environmental concerns related to fracking?

Joel

Yeah, well, it depends, you know, I think this is one of those issues where reasonable people can disagree about just how serious some of the concerns are. But concerns that have come up have to do with the chemicals that are used, and whether or not those are able to migrate into groundwater drinking supplies. There's also issues around what's called the flow back or the produced water. So what goes down must come back. And so then we have an issue around disposal and treatment and handling of all of that flow back.

Andy 

And so one of the things that I found interesting in your paper, and this is a little bit of a side note, but in the US, there's no environmental regulation of the oil and gas industry. Is that correct?

Joel

Well, yes. You know, I mean, so here in Canada, and in the United States, the predominant form of regulation is at either the province level or the state level, and so that's a duty that's been delegated to the states and provinces. You know, in certain situations in the United States for example, if you were on federally-owned lands, then there would be federal regulations in the US. That would apply. But by and large, the state is the predominant regulator of these activities.

Andy 

Okay. So just to sum it all up, we have a new way of getting oil and gas out of the ground, some concerns back and forth about what it might be doing to the environment, and then different levels of regulation. So this kind of gets us into your paper. Can you tell us some more about it?

Joel

Yeah. So this, this paper is trying to understand how this activity has emerged, and how some of these concerns have come about. You know, what's been happening on the regulatory front? And if anything, and how does that affect the public's access to information and understanding? And so that's really what we started to look at here is how, over the years, one of the things that happened starting in the United States, was the industry, in response to some of these concerns started a voluntary initiative. Okay. And they call that initiative FracFocus, and has a website FracFocus.org. And the idea was that as an operator of an oil and gas well, you could voluntarily decide to disclose the chemical recipe that you were using in your well. And so that was the sort of first starting point for us.

Andy  

Okay, and so I know you talk a lot about the RMIT framework and your paper and you just did it. Can you explain what that is? And I guess why it's important for someone like me?

Joel

Yes, this is a conceptual framework that some scholars who study governance and public policy kinds of issues have come up with. And so the RMIT framework is kind of like a triangle, if you want to picture it that way. The R stands for the regulator, the MI stands for an intermediary and the T stands for a target. So the regulator would be, for example, the oil and gas regulator in a state. And the target of the regulation might be the oil and gas operating company that's actually drilling the well. And the intermediary, in our particular cases, is this new entity that's come along called FracFocus. That is somehow trying to sit between the regulator and the target, or at least that's the way we've conceptualized it in our paper, and is somehow doing some of the burdens that you might have normally thought the regulator would do, and is somehow doing some of the transactions with the target that you might have normally expected to be a direct relation as well.

Andy

Okay, and so how widespread is FracFocus? Who's using this?

Joel

So what's happened over the past seven or eight years in the United States is that essentially it went from a voluntary program to one that became increasingly required in a number of states. And then what also happened is British Columbia adopted it as a regulatory required practice and Alberta did the same thing. So we have a similar system here in Canada. And so, you know, now what we have is, you know, the need to report these wells on a required basis.

Andy

So instead of I guess, instead of being an intermediate, what you're saying is they've kind of become a de facto regulator, almost insensitive. People feel like they’re it.

Joel

So that's exactly right. On the issue, and that's what we've been looking at is to what extent are they present themselves in a way that the public might actually think they are a regulator when they're not in a statutory sort of way? And to what extent is the information that they're providing as good as what we would hope or want from a regulator who would be performing this role?

Andy  

Okay, and so, how good a job are they doing in terms of providing medium meaningful information to the public?

Joel

Yes, so one of the criticisms of FracFocus–and we're not the only ones to make this criticism–is that the information is available on a well-by-well basis. So if you were a concerned member of the public, you could go in, you could look up, well number 123. That's maybe in your backyard and you can see what's happening there. But if you wanted to see it at a glance, all of the impacts of all the wells, let's say, surrounding your community, yeah, there's no way to do that within the FracFocus framework. And even until more recently, you couldn't have even downloaded that data to build your own sort of understanding of that. So that's one of the criticisms is that, you know, it's not necessarily presented in a way that's helpful to citizens that have these questions.

Andy  

Okay. And then, so how, and then if I do get that information, is it easy to comprehend? Is it something that a lay person will look at and say, Oh, I know what that means? Probably not. I mean, my guess

Joel

is that a lot of the information would not be that meaningful to us. So for instance, you might know that we've used this very long chemical name that you can't pronounce, right. And we've used and that has a concentration of a certain percentage in our fluid mix. But you wouldn't know whether that's a lot or a little. Is that harmful or not? So a lot of these kinds of questions about, you know, what does that mean for me and my family or things I might care about is really several levels of detail down. 

Andy 

And then I guess the other thing would be timeliness. So if something's happening with a well, as a public citizen, I want to know, when and how it happened directly. How timely are they in terms of getting that information up on the website? 

Joel

That's another area where we'd love to see more research being done. I mean, what we can see is that there's variability in how quickly, you know, the information goes from, ‘we actually did this treatment on the well’ to it's been reported out there. There's no actual regulatory teeth around, you know, just whether you do, in fact, report in a timely basis and how timely that should be, even though the regulator's all, in principle, have some guidelines around this.

Andy

So, backing up just a little bit here. You said there are four Canadian provinces that are sort of tied into FracFocus. How well are they sort of doing in terms of FracFocus? Is it the only place where people can get information? Or can they get it from both like in Alberta? How does it work? How can citizens get this information? Is there a regulatory place and FracFocus? Or just one?

Joel

Yes, it varies. So here in Alberta, which I am pretty familiar with, you could go to FracFocus.ca, right, you could navigate to the section about Alberta, and you could look at all the wells that are reported there. Yeah, you could also go to the Alberta Energy Regulator website, and one time per year, typically in February, they release all of the data as a spreadsheet for the prior year. So for example, the 2018 data became available in February of this year. And the 2019 data will become available in February of 2020. In British Columbia, you likewise can get the data both through FracFocus, or by going to what's known as the British Columbia Oil & Gas Commission, and they have the data available that way. And then Saskatchewan and Manitoba- they're not currently participants in FracFocus. So it’d really be up to the regulator to decide that they want to implement a requirement like this. Certainly, if you're an operator in one of those jurisdictions, you could voluntarily decide you want to report through this mechanism, but there's no requirement at the moment to do so.

And having said that, they're just not doing as much work as Alberta. In terms of volumes, Alberta is far and away the largest, you know, place where this activity is happening. British Columbia is in second and then you know, you would think probably Saskatchewan would be in third if we had a good look at it.

Andy  

Okay, so this is so when I hear you say that, you know, the Alberta regulatory puts it up sort of once a year. I go Oh, that's not fast enough? Do you sort of agree with that? I mean, yeah, I mean, educate me a little bit in terms of like, no, that's actually a reasonable amount of time or no, we have concerns. I have concerns about that, or...

Joel

Yeah, so I was just out on the FracFocus website yesterday in preparation for this. And so, for example, I think the most recent well from Alberta was sometime in April. So you could go out to the FracFocus website, and you can see a self reported, you know, details of the well, that had been completed in April, that won't show up in the spreadsheet of all the wells until as I said, you know, February of 2020. You know, I guess in a perfect world, probably that data would be available, or, you know, on a slightly more frequent basis, but it is available, just maybe not in the form you want. Yeah, so these are the kinds of things, you know, part of what my work tries to do is just bring awareness and attention to some of these things. Yeah. And I think, you know, it's really up to, people listening to this podcast and other citizens in different jurisdictions to think about, well, is that the kind of public policy that I want to agitate for something different.

Andy

Okay. So, and I think that's one of the things that you try to make clear, even in your paper is you're not assigning intent, or a strategy with FracFocus, in terms of, they're doing this deliberately, or nefariously, or anything like that. You're just sort of pointing out this is the way things are. And this is a way things could be done differently. 

Joel

I mean, we do, of course, make some, some critical comments where we think they're in bounds to do or where we think some improvements could be made. But the general strategy that's being used here is what academics talk about as self regulation, right. And so this is very common. Actually a lot of different industries where we don't want you to do anything you want. And at the same time, we don't necessarily want to hit with the heavy hand of government. And so there is some kind of self regulatory role that many industries play. And so that's part of the conversation, you know, that we're engaged in here, in terms of with the scholars we're talking to, thinking about how is this self regulatory initiative similar or dissimilar to ones that are happening in chemicals or accounting or, you know, different fields of activity?

Andy  

So I guess my final question is sort of this blur between self regulation and sort of official regulation that you're talking about. Do you think that that's acceptable? Is there a place still for things like FracFocus? Should it be eliminated entirely? And it should just be the regulatory bodies? Where do you sort of come out on that in terms of what you were looking at?

Joel

Yeah, I think our main concern is that the label that we gave to the paper was a sort of oxymoronic title, we call it opaque transparency, right. And the basic idea here is, at one level, this is a great transparency mechanism, you can go get this data that you would not normally have been able to get otherwise. But at the same time, the effects from the consumer is that I don't quite know what to do with it. And I don't quite know what it means. And that's the opacity, right? And so I guess, you know, to the extent we were able to make some suggestions, you know, it's really a question, how do we build on what FracFocus is already doing and perhaps move to ways of communicating that data to consumers, that's more helpful. I'll give you a for instance, when I go to China, you know, there's an app that I can have on my phone that tells me red, yellow, or green as to what the air quality looks like, for the day, okay, behind that simple code is all kinds of complicated data that I might not necessarily understand as somebody who doesn't work in in that area of science, or something like that. We think that could be a useful way of helping consumers think about the oil and gas activity that's happening in their area and what kinds of impacts it's potentially having.

Andy 

So dumb it down for people like me.

Joel

Yeah, and me. Because I mean, I actually have to go talk to my colleagues at other parts of the university to understand what all these data are right? I'm not a water toxicologist. Right. You know, yes, this is not my area of expertise. So even though I study how this is being managed, and the regulatory aspects, to really understand the human health and environmental issues that's, that's not my specialty. 

Andy

Perfect. Anything else? Before we wrap up here that you wanted to talk about or mentioned about your paper?

Joel

I don't think anything about the paper. I guess I would just, you know, encourage people who are interested to maybe, you know, educate themselves a little bit about what's going on in their area. And to use these kinds of tools to figure out whether they like the kinds of policies that exist or whether they want to see something different. 

Andy 

Perfect. Thanks, Joel.