Fracking Creates Smart-Growth Dilemma

Controversial Extraction Technique Creates Housing Challenges

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Bryce Maretzki is director of business development with the Pennsylvania Housing Finance Agency.

Gil Gonzalez is rural business program director at the University of Texas in San Antonio.

Jasper Schneider is North Dakota state director of the U.S. Department of Agriculture’s rural development program.

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Posted: Wednesday, February 20, 2013 1:30 pm

You might think it’s odd to be talking about supporting hydraulic fracturing at a smart-growth conference. But, then again, there are some who would say there isn’t anything particularly smart about urban growth of any kind. Yet, growth happens, and someone has to manage it.

In areas of the country impacted by hydraulic fracturing – commonly called fracking – it turns out that growth happens a lot, and seemingly overnight, bringing with it a long list of issues reminiscent of the fabled California gold rush of 1849.

Some see it as an economic boom; others as a problem to be solved. For those evicted from their homes because they can no longer afford the sky-rocketing rent, America’s latest “gold rush” is more of a nightmare than a dream come true.

Three authorities from Pennsylvania, Texas and North Dakota shared their stories at the 12th annual New Partners for Smart Growth Conference on Feb. 8 in Kansas City. Although some conference attendees found it impossible to forego the environmental issues surrounding the fracking debate, moderator Jenilee Webb of the U.S. Department of Housing and Urban Development did her best to keep the focus on the effects planners are dealing with on the ground, rather than the pros and cons of fracking itself.

Those effects include everything from a woefully inadequate supply of housing to a sharp increase in bar fights amid the densely populated “man camps” popping up in areas that hadn’t seen growth in decades until fracking came to town.

Induced hydraulic fracturing is a technique used to release petroleum, natural gas or other substances for extraction by drilling into reservoir rock formations and forcing highly pressurized hydraulic fracturing fluid into the borehole. The technique, popularized in the late 1990s, exposes vast amounts of formerly inaccessible hydrocarbons for extraction. But, the potential environmental impacts, which include contamination of groundwater, destruction of habitat, and other concerns, have caused the technique to be banned in some countries. In the U.S., it continues to be a highly controversial issue driven by tremendous economic potential and a desire to be “energy independent” by relying less on foreign oil.

According to Gil Gonzalez, rural business program director at the University of Texas in San Antonio, the state of Texas leads the nation with 7 to 10 billion barrels of recoverable oil in the Eagle Ford Shale region alone. Generating about 120,000 jobs, oil and gas extraction in the Eagle Ford region is expected to have an economic impact of $90 billion over the next 10 years.

But, that’s only the beginning. Gonzalez says the U.S. Geological Survey has recently discovered an estimated 30 billion barrels of extractable oil in the Cline Shale region of western Texas. North Dakota is second in the nation with about 4 billion barrels of recoverable oil.

In Pennsylvania, fracking opened the floodgates on a rural economy that had been stagnant for decades.

“In about 2006, we began to start hearing about these land guys coming to Pennsylvania and signing leases with farmers,” said Bryce Maretzki, director of business development with the Pennsylvania Housing Finance Agency. “We’re talking about some very rural parts of Pennsylvania where aside from some coal extraction and steel production there hasn’t been much going on for 60-plus years.

“So motels were all of a sudden getting very full. Restaurants were all of a sudden requiring reservations. We were beginning to hear that bars were having fights. The police were actually being called out into the community, and some communities actually needed to hire police for the first time,” Maretzki said.

He said the “epicenter” of the oil and gas production boom in the state occurred in a county with less than 4,000 natives.

“As we went out and started to talk to these communities and they started to scream at us inside government, we were hearing that ‘our roads are being destroyed, our farms are being torn up.’ And then we’d go talk to people who had signed leases and they were saying, ‘I could get gold.’ They were signing incredible leases for long periods of time. So, there was this very interesting dichotomy going on, starting in about 2006.”

By 2011, work on drilling the new wells was going “full bore,” Maretzki said, and the number of wells was growing exponentially. To date, more than 5,000 new drilling operations have come online in the state.

The same story has played out in other regions of the country, especially in Texas, where fracking has been a “game changer,” according to Gonzalez. His department helps small towns in Texas – “some with more cattle than people” – deal with the growing pains associated with the rapid expansion of oil and gas operations in their communities.

In some cases, Gonzalez said, the smaller communities don’t have the organizational, leadership, or financial capacity to develop and implement smart-growth plans.

“One of the biggest challenges occurring in these oil-impacted areas is affordability of housing,” Gonzalez said. “It pretty much puts people in the street. They become homeless. So, what’s our alternative? … We don’t want hotels… and other non-sustainable options. The oil and gas industry is very fraternal. It moves in a unit. It has transient workers, but in the end, it’s not that transitory. When you’re there for 15 or 20 years, you become part of that community.

Gonzalez said some of the areas in Texas impacted most by the fracking boom are among the most impoverished areas of the U.S.

“So, from that standpoint, the challenge is huge when it comes to infrastructure, when it comes to housing, and when it comes to social capacity,” he said. “They have no core competency with regard to strategic planning, comprehensive planning, financing public projects, applying for a government loan or grant. Some of them are struggling with this.”

Worse yet, Gonzalez said first responders in some communities are not adequately prepared to fight chemical fires.

To address these problems, the University of Texas has developed training programs for municipal leaders in rural areas of the state, financed in part by voluntary contributions from the oil and gas companies.

Pennsylvania has gone one step further, according to Maretzki. It has instituted an "impact fee" assessed to drilling operators in the state. That fee generated $206 million in 2012, about 60 percent of which went back to the communities impacted by the fracking operations. The rest went to the state’s departments of environmental planning, environmental protection, transportation and housing -- all intended to address the impacts of fracking.

About $8 million helped fund the state’s “PHARE” housing act. The Pennsylvania Housing Affordability and Rehabilitation Enhancement fund pays for a wide range of housing activities, many targeted to increase the availability of low-income housing in the Marcellus Shale gas fields.

“We were seeing in some of these places motels and hotels being bought and turned into long-term housing for workers,” Maretzki said. “We were seeing rents triple, quadruple… five times, six times. Any housing unit that became available in that region was being snapped up, primarily by people coming from outside Pennsylvania for short periods of time. But, they were being paid loads of money, so they were willing to pay anything to have a place to stay while they were there.”

“We had people becoming homeless very quickly. Their lease would end, their rents would quadruple, they couldn’t afford it anymore… so they were out,” Maretzki said.

Gonzalez described a south Texas community with a population less than 500 trying to support a transient workforce of more than 12,000 people. Local employers couldn't compete with the wages paid by the gas and oil companies, so many businesses began cutting back hours or curtailing services. This has exacerbated the flight of young people away from local communities, Gonzalez said.

The fracking operations in North Dakota can be seen from space in nighttime satellite images that show the flaring of natural gas in the oil fields shining as brightly as some metropolitan areas of the country. Jasper Schneider, North Dakota state director of the U.S. Department of Agriculture’s rural development program, said the oil fields there were discovered 25 years ago, but the extraction technology at the time was not cost effective. All that changed with hydraulic fracturing.

Schneider said the average per capita income in the state has increased from $25,000 in 2000, when it ranked 38th in the nation, to $45,000 in 2010, now ranking 9th in the United States. At 3.1 percent, it has one of the slightest unemployment rates in the country.

With about 7,700 operating wells, the state produces more than 700,000 barrels of oil per day, recently surpassing Alaska, Oklahoma and California to become the second largest oil producing state behind Texas, Schneider said.

With all that oil comes a lot of money, both in terms of personal wealth (six-figure incomes are not uncommon among oil rig workers), as well as tax revenues to state and local coffers. But, the challenges are also considerable, Schneider said.

“Part of the growing pain is just explosive growth,” he said. “We are not a big state. We were not equipped at the time to take on massive population increases, massive industry. Any way you spin it, we are playing catch-up to support this massive growth.”

Schneider said the North Dakota legislature only meets once every two years, so the pace of legislation is slow. And, ironically, access to public and private capital is a major challenge.

“Local bankers in North Dakota have been through boom and bust cycles before… so they’re a little bit gun shy. But, there’s also been some reforms to the banking industry, the credit and capital crunch, that have been felt in North Dakota, too,” he said.

To find the money, Schneider said his office has been trying to forge public/private partnerships with oil and gas companies and other business interests who see opportunity in the state.

Meanwhile, North Dakota’s infrastructure continues to deteriorate under the stain. Its water systems are running at maximum capacity. Its cell phone towers are overwhelmed. The costs of labor and construction materials have inflated significantly.

And when the oil fields dry up… what then?

“One of our biggest challenges is maintaining a diversified economy,” Schneider said. “Oil and natural gas, of course, are non-renewable resources. So, how do we invest in new industries or attract new industries so that as the price of oil drops or we move to renewable energy we have the industries in place and the workforce that is trained to work in those new industries?”

“The key is to get smart and plan. It’s hard to do because we’re going through so much growth very quickly, and everybody is so busy, but it’s imperative that we take a step back and ask ourselves what we want our state to look like 20 or 50 years down the road.”

Schneider said the U.S.D.A. has launched a number of planning initiatives, one in cooperation with the Environmental Protection Agency, to help local communities define their future.

But, to some, just the thought of a future impacted by the burning of fossil fuels and the potential contamination of precious water resources is enough to end the conversation.

“I think this discussion is quite strange at a conference that speaks to the issues of climate-change adaptation, and how we can reduce our greenhouse gas emissions,” said Amy Goldsmith, state director for the Clean Water Fund, a national organization dedicated to protecting water resources. She said fracking contributes to greenhouse gas emissions and contaminates water supplies already impacted by severe drought conditions, especially in North Dakota and Texas.

“How can you contaminate scarce fresh drinking water supplies and still talk about growing small towns on an extraction industry that is counter to everything this particular conference is about?” she asked.

Margaret May, executive director of the Ivanhoe Neighborhood Council in Kansas City, agreed.

“I felt the question about health was glossed over and I didn’t hear anything about the negative impact on the environment,” she said.

Schneider responded by saying that the environmental issues “underscore the need for good leadership, and people should hold their leaders accountable to the issues they feel passionate about.”

Maretzki said, “What we have to focus on from a smart growth standpoint is how do we plan and mitigate and look into the future? This is an opportunity, and that opportunity has challenges that we all have to face together. … I am encouraged by the fact that people are coming together, and they’re talking about it, and there’s leadership being developed to think about it into the future.”

In Texas, a grassroots organization called the Eagle Ford Consortium is composed of stakeholder representatives of a cross-section of community members, including those dedicated to environmental issues, Gonzales said. He said no studies in Texas have yet determined that fracking chemicals are getting into the water table, but he said stakeholders representing agriculture and public health are actively involved in the consortium.

“They are being responsible, looking at the opportunity, but also looking at environmental management. There’s a balance there. …There are about eight different committees looking at a variety of issues that really focus on sustainability,” he said.

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