Environment Ohio’s Report Shows Ohio’s Weak Bonding Rules Leave Communities Exposed to Drilling Damage
Raising new concerns on a little-examined dimension of the fracking debate, Environment Ohio Research & Policy Center today released a report analyzing Ohio’s financial assurance requirements for oil and gas drilling operations. Who Pays the Costs of Fracking? shows how Ohio’s bonding requirements are completely inadequate to cover the cost and range of damage from dirty drilling.
“From contaminated drinking water to long-term illness, who is going to be there to pay the piper after the new gas rush is over?” asked Julian Boggs, policy advocate from Environment Ohio. “With Ohio’s weak bonding requirements, all too often individual residents and communities are going to be left with a heavy tab for fracking damage.”
Just reclaiming a fracking site can cost hundreds of thousands of dollars. And the damage done by fracking – from contaminated groundwater to ruined roads – can cost millions of dollars. As shown in Environment Ohio’s report, Ohio’s bonding requirements do not even come close to covering these costs:
· Drilling operators are only required to secure $5,000 in bonds per well up front, compared to leading states that require $250,000.
· Ohio’s requirement for liability insurance is a blanket statewide amount, so drillers need the same $5 million cap whether they operate one well or one hundred.
“At a minimum, Ohio needs an adequate severance tax to fund impacts on communities and provide a cushion for long term risk management,” said Policy Matters Ohio director Wendy Patton.
Today’s report comes on the heels of the Ohio’s General Assembly’s rejection of even a modest severance tax on the oil and gas industry in the biennial budget. But as the report shows, taxes and fees these can play some role in defraying some fracking costs, but they are not substitutes for robust, up-front financial assurance. Unlike appropriately structured bonding, impact fees and severance taxes do nothing to deter drilling operators from the worst polluting practices – like open waste pits or using cancer-causing chemicals in fracking fluid - or to avoid drilling sites that would create greater health or environmental risks.
"I have seen firsthand the damage that can be done to a community and its infrastructure when people and companies cut corners in fracking and waste water disposal,” said Youngstown City Councilman Mike Ray. “Common sense bonding would at least ensure that taxpayers aren't left holding the bag."
At the national level, the report also highlights the Bureau of Land Management’s exceedingly weak bonding requirements for drilling, just as federal officials are considering new rules for fracking on federal lands.
Today’s report is the second in a series. In the first report – The Costs of Fracking (2012) – Environment Ohio Research & Policy Center provided documented examples of the dollar and cents costs related to the myriad environmental impacts of fracking – from replacing contaminated drinking water to fixing ruined roads to treating illness from air pollution.
Of particular concern for financial accountability are the long-term costs of fracking. According to the report, across the nation by 2006 there were already 59,000 abandoned oil and gas wells and at least another 90,000 whose status is unknown. The potential cost for just plugging these wells exceeds $780 billion. The fracking boom is now adding thousands of new wells to this mix.
“From coal to oil to mining, we’ve seen every boom of extraction leave a legacy of pollution that future generations are left to grapple with,” observed Boggs. “Ohio’s weak bonding requirements are yet another reason why fracking is taking us down the same disastrous path.”