By Pattrick Smellie
Nov. 27 (BusinessDesk) - The controversial oil and gas discovery technique known as fracking is safe when conducted to best practice standards, says the Parliamentary Commissioner for the Environment, Jan Wright, in an interim report
However, she will spend the next six months assessing whether New Zealand's "fragmented" regulatory system is up to scratch and lays out seven recommendations in the meantime relating to the main factors that should govern hydraulic fracturing, or "fracking", operations.
"The environmental risks associated with fracking can be managed effectively provided, to quote the United Kingdom Royal Society, 'operational best practices are implemented and enforced through regulation'.
"But at this stage I cannot be confident that operational best practices are actually being implemented and enforced in this country," Wright says in a long-awaited report which will disappoint the Green Party and delight the government, which has pinned much hope on an upsurge in oil and gas discoveries to boost New Zealand's economic growth rates.
Wright is an independent officer of Parliament who chose to investigate fracking after a sudden surge in public concern about the practice in the last two years. In other reports, she has been deeply critical of plans to use brown coal lignite for fuel and fertiliser, as proposed by Solid Energy, and of the government's watering down of the emissions trading scheme. A report last year concluded the poison 1080 was appropriate for managing the impact of pest animals on native bush and birds.
While fracking has been undertaken in New Zealand for more than two decades already, Wright acknowledged that to many people the practice "just feels wrong". The absence of a "social licence to operate" was one of the major obstacles to the technology being widely used outside the oil and gas province, Taranaki.
"The company executive who reportedly stated that the North Island east coast could become the Texas of the South clearly did not realise that a vision of green pastoral landscapes dotted with wellheads was unlikely to gladden the hearts of many New Zealanders," she observes of comments by Canadian producer TAG Oil, which is producing oil in Taranaki and has extensive east coast exploration permits where it has signalled it may want to frack.
Fracking involves injecting fluid containing sand and chemicals at high pressure to fracture rock to release oil and gas trapped in so-called "tight" geological formations. Its widespread use in the United States has been instrumental in the US overtaking Saudi Arabia as the world's largest hydrocarbon producer, but has provoked environmental protests.
The practice is banned in France and Bulgaria and faces a moratorium in the Australian state of Victoria, although a similar ban in New South Wales has recently been lifted and extensive fracking plans in Queensland are provoking a backlash from farmers and environmental activists.
The report concludes that while there are real dangers of groundwater contamination from fracking, these come mainly from poor handling of wastewater at the surface, while it describes the potential for deeply trapped oil and gas to leak into groundwater as "remote."
Poorly constructed well casings could cause environmental damage, but this is a risk common to all oil and gas extraction, the report says.
Likewise, it dismisses the potential for fracking to cause damaging earthquakes, even while acknowledging the potential for fracking near an active fault could trigger small quakes.
"The process of fracking itself only causes very tiny earthquakes," the report says. "But if liquids (fracking fluid or wastewater) were to find their way into an already stressed fault, the fault might slip triggering a more significant (though probably small) earthquake."
She identified four critical factors for safe fracking as: the choice of well site, the quality of well construction, avoiding surface spills and leaks, and safe disposal of waste.
She will examine three further three key issues for her final report, due by mid-2013: regulatory complexity, the possibility that regulation is "too light-handed", and the need for the oil industry to earn a "social licence to operate."
"Unravelling the labyrinthine roles of different central government agencies, and the relevant responsibilities of regional and local government, has been a major exercise in itself," said Wright. " Such complexity works against open transparent government, and important issues can fall between the cracks."
She worried also that regulation may not be "fit-for-purpose."
"Companies are perhaps being trusted rather too much to all do 'the right thing'. This applies to protecting health and safety as well as the environment."
The biggest issue with fracking was its impact on climate change, as a new source of carbon emissions, said Wright.
However, the jury is out on whether it may help or hinder. While supporters say fracking moves the world away from the use of carbon-heavy coal, it might also discourage development of cleaner alternatives.