When the Environmental Protection Agency abruptly retreated on its investigation into water contamination in a central Wyoming natural gas field recently, it shocked environmentalists and energy industry supporters alike
When the Environmental Protection Agency abruptly retreated on its multimillion-dollar investigation into water contamination in a central Wyoming natural gas field last month, it shocked environmentalists and energy industry supporters alike.
In 2011, the agency had issued a blockbuster draft report saying that the controversial practice of fracking was to blame for the pollution of an aquifer deep below the town of Pavillion, Wy. – the first time such a claim had been based on a scientific analysis.
The study drew heated criticism over its methodology and awaited a peer review that promised to settle the dispute. Now the EPA will instead hand the study over to the state of Wyoming, whose research will be funded by EnCana, the very drilling company whose wells may have caused the contamination.
Industry advocates say the EPA’s turnabout reflects an overdue recognition that it had over-reached on fracking and that its science was critically flawed.
But environmentalists see an agency that is systematically disengaging from any research that could be perceived as questioning the safety of fracking or oil drilling, even as President Obama lays out a plan to combat climate change that rests heavily on the use of natural gas.
Over the past 15 months, they point out, the EPA has:
• Closed an investigation into groundwater pollution in Dimock, Pa., saying the level of contamination was below federal safety triggers.
• Abandoned its claim that a driller in Parker County, Texas, was responsible for methane gas bubbling up in residents’ faucets, even though a geologist hired by the agency confirmed this finding.
• Sharply revised downward a 2010 estimate showing that leaking gas from wells and pipelines was contributing to climate change, crediting better pollution controls by the drilling industry even as other reports indicate the leaks may be larger than previously thought.
• Failed to enforce a statutory ban on using diesel fuel in fracking.
“We’re seeing a pattern that is of great concern,” said Amy Mall, a senior policy analyst for the Natural Resources Defense Council in Washington. “They need to make sure that scientific investigations are thorough enough to ensure that the public is getting a full scientific explanation.”
The EPA says that the string of decisions is not related, and the Pavillion matter will be resolved more quickly by state officials. The agency has maintained publicly that it remains committed to an ongoing national study of hydraulic fracturing, which it says will draw the definitive line on fracking’s risks to water.
In private conversations, however, high-ranking agency officials acknowledge that fierce pressure from the drilling industry and its powerful allies on Capitol Hill – as well as financial constraints and a delicate policy balance sought by the White House -- is squelching their ability to scrutinize not only the effects of oil and gas drilling, but other environmental protections as well.
Last year, the agency’s budget was sliced 17 percent, to below 1998 levels. Sequestration forced further cuts, making research initiatives like the one in Pavillion harder to fund.
One reflection of the intense political spotlight on the agency: In May, Senate Republicans boycotted a vote on President Obama’s nominee to head the EPA, Gina McCarthy, after asking her to answer more than 1,000 questions on regulatory and policy concerns, including energy.
The Pavillion study touched a particular nerve for Sen. James Inhofe, R-Okla., the former ranking member of the Senate Environment and Public Works committee.
According to correspondence obtained under the Freedom of Information Act, Inhofe demanded repeated briefings from EPA officials on fracking initiatives and barraged the agency with questions on its expenditures in Pavillion, down to how many dollars it paid a lab to check water samples for a particular contaminant.
He also wrote a letter to the EPA’s top administrator calling a draft report that concluded fracking likely helped pollute Pavillion’s drinking water “unsubstantiated” and pillorying it as part of an “Administration-wide effort to hinder and unnecessarily regulate hydraulic fracturing on the federal level.” He called for the EPA’s inspector general to open an investigation into the agency’s actions related to fracking.
When the EPA announced it would end its research in Pavillion, Inhofe – whose office did not respond to questions from ProPublica -- was quick to applaud.
“EPA thought it had a rock solid case linking groundwater contamination to hydraulic fracturing in Pavillion, WY, but we knew all along that the science was not there,” Inhofe said in a press release issued the day of the announcement.
Others, however, wonder whether a gun-shy EPA is capable of answering the pressing question of whether the nation’s natural gas boom will also bring a wave of environmental harm.
“The EPA has just put a ‘kick me’ sign on it,” John Hanger, a Democratic candidate for governor in Pennsylvania and the former secretary of the state’s Department of Environmental Protection, wrote on his blog in response to the EPA news about Pavillion. “Its critics from all quarters will now oblige.”
Before fracking became the subject of a high-stakes national debate, federal agencies appeared to be moving aggressively to study whether the drilling technique was connected to mounting complaints of water pollution and health problems near well sites nationwide.
As some states began to strengthen regulations for fracking, the federal government prepared to issue rules for how wells would be fracked on lands it directly controlled.
The EPA also launched prominent scientific studies in Texas, Wyoming and Pennsylvania, stepping into each case after residents voiced concerns that state environmental agencies had not properly examined problems.
The EPA probe in Pavillion began in 2008 with the aim of determining whether the town’s water was safe to drink. The area was first drilled in 1960 and had been the site of extensive natural gas developmentsince the 1990’s. Starting at about the same time, residents had complained of physical ailments and said their drinking water was black and tasted of chemicals.
The EPA conducted four rounds of sampling, first testing the water from more than 40 homes and later drilling two deep wells to test water from layers of earth that chemicals from farming and old oil and gas waste pits were unlikely to reach.
The sampling revealed oil, methane, arsenic, and metals including copper and vanadium – as well as other compounds --in shallow water wells. It also detected a trace of an obscure compound linked to materials used in fracking, called 2-butoxyethanol phosphate (2-BEp).
The deep-well tests showed benzene, at 50 times the level that is considered safe for people, as well as phenols -- another dangerous human carcinogen -- acetone, toluene, naphthalene and traces of diesel fuel, which seemed to show that man-made pollutants had found their way deep into the cracks of the earth. In all, EPA detected 13 different compounds in the deep aquifer that it said were often used with hydraulic fracturing processes, including 2-Butoxyethanol, a close relation to the 2-BEp found near the surface.
The agency issued a draft report in 2011 stating that while some of the pollution in the shallow water wells was likely the result of seepage from old waste pits nearby, the array of chemicals found in the deep test wells was “the result of direct mixing of hydraulic fracturing fluids with ground water in the Pavillion gas field.”
The report triggered a hailstorm of criticism not only from the drilling industry, but from state oil and gas regulators, who disagreed with the EPA’s interpretation of its data. They raised serious questions about the EPA’s methodology and the materials they used, postulating that contaminants found in deep-well samples could have been put there by the agency itself in the testing process.
In response, the EPA agreed to more testing and repeatedly extended the comment period on its study, delaying the peer review process.
Agency officials insist their data was correct, but the EPA’s decision to withdraw from Pavillion means the peer-review process won’t go forward and the findings in the draft report will never become final.
“We stand by what our data said,” an EPA spokesperson told ProPublica after the June 20 announcement, “but I do think there is a difference between data and conclusions.”
Wyoming officials say they will launch another year-long investigation to reach their own conclusions about Pavillion’s water.
Meanwhile, local residents remain suspended in a strange limbo.
While controversy has swirled around the deep well test results -- and critics have hailed the agency’s retreat as an admission that it could not defend its science -- the shallow well contamination and waste pits have been all but forgotten.
The Agency for Toxic Substances and Disease Registry, the federal government’s main agency for evaluating health risk from pollution, has advised Pavillion residents not to bathe, cook with, or drink the water flowing from their taps. Some have reported worsening health conditions they suspect are related to the pollution. They are being provided temporary drinking water from the state in large cisterns.
The EPA opened its inquiry in Dimock, Pa., after residents provided it with private water tests detecting contaminants and complained that state regulators weren’t doing enough to investigate the cause.
When an elderly woman’s water well exploded on New Year’s morning in 2009, Pennsylvania officials discovered pervasive methane contamination in the well water of 18 homes and linked it to bad casing and cementing in gas company wells. In 2010, they took a series of steps against the drilling company involved, citing it for regulatory violations, barring it from new drilling until it proved its wells would not leak and requiring it to temporarily supply water to affected homes.
But residents said state officials hadn’t investigated whether the drilling was responsible for the chemicals in their water. The EPA stepped in to find out if residents could trust the water to be safe after the drilling company stopped bringing replacement supplies.
Starting in early 2012, federal officials tested water in more than five dozen homes for pollutants, finding hazardous levels of barium, arsenic and magnesium, all compounds that can occur naturally, and minute amounts of other contaminants, including several known to cause cancer.
Still, the concentration of pollutants was not high enough to exceed safe drinking water standards in most of the homes, the EPA found (in five homes, filtering systems were installed to address concerns). Moreover, none of the contaminants – except methane -- pointed clearly to drilling. The EPA ended its investigation that July.
Critics pointed to the Dimock investigation as a classic example of the EPA being overly aggressive on fracking and then being proven wrong.
Yet, as in Pavillion, the agency concluded its inquiry without following through on the essential question of whether Dimock residents face an ongoing risk from too much methane, which is not considered unsafe to drink, but can produce fumes that lead to explosions.
The EPA also never addressed whether drilling – and perhaps the pressure of fracking – had contributed to moving methane up through cracks in the earth into their water wells.
As drilling has resumed in Dimock, so have reports of ongoing methane leaks. On June 24, the National Academy of Sciences published a report by Duke University researchers that underscored a link between the methane contamination in water in Dimock and across the Marcellus shale, and the gas wells being drilled deep below.
The gas industry maintains that methane is naturally occurring and, according to a response issued by the industry group Energy In Depth after the release of the Duke research, “there’s still no evidence of hydraulic fracturing fluids migrating from depth to contaminate aquifers.”
In opening an inquiry in Parker County, Texas, in late 2010, the EPA examined a question similar to the one it faced in Dimock: Was a driller responsible for methane gas bubbling up in residents’ water wells?
This time, though, tests conducted by a geologist hired by the agency appeared to confirm that the methane in the wells had resulted from drilling, rather than occurring naturally.
"The methane that was coming out of that well … was about as close a match as you are going to find," said the consultant, Geoffrey Thyne, a geochemist and expert in unconventional oil and gas who has been a member of both the EPA’s Science Advisory Board for hydraulic fracturing, and a National Research Council committee to examine coalbed methane development.
The EPA issued an “imminent and substantial endangerment order” forcing Range Resources, the company it suspected of being responsible, to take immediate action to address the contamination.
But once again, the EPA’s actions ignited an explosive response from the oil and gas industry, and a sharp rebuke from Texas state officials, who insisted that their own data and analysis proved Range had done no harm.
According to the environmental news site Energy Wire, Ed Rendell, the former Governor of Pennsylvania, whose law firm lobbies on behalf of energy companies, also took up Range’s case with then-EPA Administrator Lisa Jackson.
Internal EPA emails used in the EnergyWire report and also obtained by ProPublica discuss Rendell’s meeting with then-EPA Administrator Lisa Jackson, though Range has denied it employed Rendell to argue on its behalf. Neither the EPA nor Rendell responded to a request for comment on the Parker County case.
In March 2012, the EPA dropped its case against Range without explanation. Its administrator in Texas at the time had been assailed for making comments that seemed to show an anti-industry bias. He subsequently lost his job. An Associated Press investigation found that the EPA abandoned its inquiry after Range threatened not to cooperate with the EPA on its other drilling-related research.
Agency critics see a lack of will, rather than a lack of evidence, in the EPA’s approach in Parker County and elsewhere.
“It would be one thing if these were isolated incidents,” said Alan Septoff, communications director for Earthworks, an environmental group opposed to fracking. “But every time the EPA has come up with something damning, somehow, something magically has occurred to have them walk it back.”
So where does this leave the EPA’s remaining research into the effects of fracking?
The agency has joined with the Department of Energy, U.S. Geological Survey and the Department of Interior to study the environmental risks of developing unconventional fuels such as shale gas, but those involved in the collaboration say that little has happened.
That leaves the EPA’s highly anticipated national study on hydraulic fracturing.
When the EPA announced it was ending its research in Pavillion, it pointed to this study as a “major research program.”
“The agency will look to the results of this program as the basis for its scientific conclusions and recommendations on hydraulic fracturing," it said in a statement issued in partnership with Wyoming Gov. Matt Mead.
That national study will concentrate on five case studies in Pennsylvania, Texas, North Dakota and Colorado.
It will not, however, focus on Pavillion or Parker County or Dimock.
Nor will it devote much attention to places like Sublette County, Wy., where state and federal agencies have found both aquifer contamination and that drilling has caused dangerous levels of emissions and ozone pollution.
It will be a long time before the EPA’s national study can inform the debate over fracking. While the agency has promised a draft by late 2014, it warned last month that no one should expect to read the final version before sometime in 2016, the last full year of President Obama’s term.
The allocation of the blocks, having a geological reserve of 8,311 million tonnes, will lead to an investment of more than Rs1.6 lakh crore in the power sector
Kick-starting the process of coal blocks allocation, the government has allocated 14 coal mines to Central and state PSUs, including four to NTPC.
“Ministry of coal has allocated 14 coal blocks for power sector. Around 15 states and six Central PSUs have been allocated coal blocks,” an official release said.
The allocation of the blocks, having a geological reserve of 8,311 million tonnes (MT), will lead to an investment of more than Rs1.6 lakh crore in the power sector, it said.
Of the four coal blocks allocated to NTPC, two are in Chhattisgarh and the remaining two in Odisha. The blocks have reserves of 1,995 MT of coal.
Other PSUs which have been allocated mines include Neyveli Uttar Pradesh Power, Odisha Thermal Power Corporation, Jammu & Kashmir State Power Dev Corporation, Chhattisgarh State Power Gen Co, Andhra Pradesh Generation Co, Maharashtra State Power Generation Co, Rajasthan Vidyut Utpadan Nigam and Punjab State Power Corporation.
The Deocha-Pachami coal block in West Bengal having a reserve of 2,102 MT has been given to six different state power PSUs, the release said.
The blocks capable of producing about 159 MT of coal per annum will cater to about 31,800 MW of power generation capacity in the country, it added.
The mines are allocated “on the recommendation of the inter-ministerial committee after due deliberations at every stage with applicant State Government, host states where the coal blocks are located and the concerned administrative ministry,” the release said.
The notice invited applications with regard to mines for PSUs last year. In total 318 applications were received, out of which 276 applications were found to be complete in all respects.
“Out of these, 235 applications pertained to 14 coal blocks for power. After scrutiny and verification of facts and other important parameters, 128 applications were considered eligible for these 14 coal blocks for power,” it said.
The Standing Committee has categorically said that the increase in bilaterals appears to facilitate one airline’s ability to strike a stake-sale deal with a foreign airline at a huge premium. The FIPB, SEBI and the Competition Commission are worried about ownership and control of Jet
That the pricing of the deal between Naresh Goyal-led Jet Airways and Etihad Airways came so quick on the heels of signing a lucrative bilateral agreement increasing the weekly seat entitlement to 40,000 between India and Abu Dhabi has raised several pertinent questions from key quarters. The Prime Minister (PM), an inter-ministerial group (IMG), a Parliamentary Committee, the capital market regulator and last but not the least, the competition watchdog have expressed reservations about both the deal as well as the substantial seat enhancement.
PM Manmohan Singh expressed reservations about the seat enhancement to 40,000 per week and about Etihad controlling the bulk of seats on the India-Abu Dhabi route. The Securities and Exchange Board of India (SEBI) and the Competition Commission of India (CCI) have already sought clarity from the domestic carrier about the transaction. Their issue is whether Etihad’s controlling interest in Jet remains in line with its 24% stake in its equity capital.
A report of the Parliamentary Standing Committee on Transport Tourism and Culture, submitted in the Lok Sabha on 3 May 2013, had also expressed reservations about foreign direct investment (FDI) in the aviation sector, enhancement in the bilateral agreement and Jet-Etihad deal. The Committee noted that the much-fancied decision to allow FDI in civil aviation has found only one taker so far. “The Committee recommends that FDI may be allowed in such a way that it should not affect the operational viability of India's national carrier—Air India and various airports of India. The FDI in civil aviation sector should aim at developing aviation hubs within the country and any policy to the contrary should be discouraged,” the report said.
In fact, the Committee expressed surprise at the increase in bilateral entitlement to 36,670 seats a week. It said, “Prime facie this move appears to facilitate one airline to strike a deal with a foreign Airline for its stake sale at a huge premium. The Committee feels that the huge premium could be a backhanded way of obtaining access to the huge civil aviation market in India.”
On 22 April 2013, the government had increased the bilateral weekly seats between India and Abu Dhabi to 36,670 seats a week from 13,330 at that time. The announcement came in the backdrop of Etihad paying huge premium of 32% over the market price to pick up just 24% equity in Jet Airways.
“The increase in the bilateral agreement is questionable,” the Committee said, “especially, in view of the fact that the Indian carriers are not in a position to use increased seat capacity due to fleet constraints. In such a situation, the foreign airline may try to catch up passenger traffic headed to destinations in North America, Europe, Africa and Middle East resulting in huge losses to Air India and various airports of India.”
The creation of Emirate’s specific capacity entitlements, coupled with unbridled access to all major cities in India for the airlines of the UAE, has already resulted in Dubai establishing itself as the primary hub for Indian traffic. “Already Emirates Airlines is being called the ‘national airline’ of India, as it operates more flights and carries more passengers to/from India than Air India, our national carrier. More than 70% of the passengers carried by Emirates Airlines, however, travel to points beyond Dubai, on Emirates’ network. Now, Abu Dhabi is also keen to emulate the success of Dubai and Emirates Airlines, and is keen to establish Abu Dhabi as another hub airport on the back of Etihad Airways, and for this reason, is aggressively seeking an increase in capacity entitlements,” the Committee said.
Allowing Abu Dhabi to come up as another hub, which is only a three-hour flight away from the major Indian metros would certainly have an adverse impact on India’s efforts to establish a world-class hub in the country.
The Committee also asked the ministry of civil aviation (MCA) to the reconsider the bilateral agreement with the UAE, and keep it frozen at the current level of 13,330 seats and open any bilateral only after the capacity of the Indian carriers is increased.
The Committee was informed that Jet Airways sold three of its slots in London to Etihad, which was confirmed by the secretary of MCA. The Committee said, “Carriers have no right to sell the bilateral allotted to them to other airlines that too a foreign airline. The Committee recommends that the government should take away the slots from Jet Airways and the airlines should be penalized for selling the national property—bilateral.”
Soon after signing an agreement with Etihad, the Naresh Goyal-led Jet carrier submitted an application before the Foreign Investment Promotion Board (FIPB) on 26 April 2013. FIPB asked Jet Airways to revise the application by modifying the shareholders' agreement, in which, it was apparent that the effective control was being passing to Etihad.
Later, Jet submitted a fresh amended document and restated the shareholders' agreement, along with the commercial co-operation agreement dated 27 May 2013. However, even this had the same terms for effective control and operation.
Clause 2.1.6 states that:
“Etihad shall source candidates for senior management positions within Jet and both parties shall second employees to each other’s businesses, as appropriate”.
This clearly shows that Etihad would decide all senior management positions in Jet Airways, thereby, gaining effective management control and the right of the foreign airline to interfere in the management of the domestic carrier.
Clause 2.1.7 states that:
“Co-location of network and revenue management functions to be relocated to Abu Dhabi at Jet’s expense. In an phased manner; Phase 1, which shall be completed within 90 days of the Closing Date (as such term is defined in the Investment Agreement), and will consist of international and domestic network planning, international pricing—non India point of sale and the management of Joint fare filing, and the inventory control of the Abu Dhabi hub routes. Phase 2, which shall be completed as soon as reasonably possible, will consist of international revenue management, domestic scheduling and pricing, international India point of sale pricing, interline pricing and all other functions associated with network and revenue management not contained in Phase 1. Specific details of India point of sale pricing to be reviewed by the Parties. Etihad shall provide the office infrastructure and technology needs of Jet’s functions to be relocated to Abu Dhabi”.
This in effect means that Etihad would operate and manage affairs of Jet Air both domestically and internationally. In short, Jet Air was becoming a virtual subsidiary of Etihad with effective control in the hands of UAE carrier.
According to Clause 2.2 of the shareholders agreement submitted by Jet to FIPB, the deployment of Jet’s fleet on new services to Abu Dhabi would be done in 2013 itself. It also determines that Jet would fly to both New Jersey and New York using Indian bilateral rights and Chicago via Abu Dhabi. This would provide Abu Dhabi with greater frequency and connectivity into the US, using India’s bilateral rights.
Further, the Clause 2.2.5 makes is mandatory for Jet to use Abu Dhabi as its exclusive hub to Africa, North and South America and the UAE. This means that Jet can only fly to these countries via Abu Dhabi and not directly from India and all this using Indian bilateral rights with those third countries.
Clause 2.2.5 states:
“Jet using Abu Dhabi as its exclusive hub for scheduled services to and from Africa, North and South America and the UAE (the ‘Exclusive Territory’), unless it is mutually agreed that Jet operating non-stop service between India and destinations in the exclusive territories is economically beneficial to the parties. The parties agree that Canada will be excluded from the exclusive territory until appropriate amendments to the relevant air service agreements allow Jet to operate through Abu Dhabi with 5th freedom rights. This includes Jet refraining from code-sharing with any other airline (or any other airline code-sharing with Jet), the impact of which would result in bypassing the Abu Dhabi hub for traffic to/ from the exclusive territory”.
Last month, FIPB deferred a decision on the Rs2,000-crore Jet-Etihad deal, the largest foreign investment in the Indian aviation sector, and sought clarity on control and ownership. However, FIPB want SEBI to take a call on the effective ownership and control of Jet Airways in the wake of revised agreement.
SEBI is concerned only with matters relating to, and for protecting the public shareholder interest, and enforcing the Takeover Code with the relevant provisions of effective Control and Ownership. These are not related in any way to the laws and rules on effective control and ownership in civil aviation. Effective control in terms of the FDI and FDI policy are determined either by Department Of Industrial Policy & Promotion (DIPP) and FIPB.
In terms of Civil Aviation Law (schedule 9 of Aircraft rules 937 read with rule 134) the civil aviation ministry is the competent authority to determine effective control. This means SEBI is not the competent or the appropriate authority to handle the Jet-Etihad deal. Then why the FIPB headed by economic affairs secretary Arving Mayaram wants SEBI to take a call?
As per the proposal, Jet Airways plans to sell 24% stake to Etihad for about Rs2,058 crore.
Jet Airways, following concerns raised by SEBI, on 24 May 2013 deferred a crucial proposal to amend its Articles of Association (AoA). SEBI had expressed reservations regarding the shareholders' agreement entered into by Jet and Etihad that gives the UAE carrier substantial management rights and the right to nominate three directors on the board of Naresh Goyal-led airline as well to decide senior management positions.
Fair trade regulator, the CCI, after receiving an application seeking approval for the Jet-Etihad deal is also looking from the point of anti-competitive practices.
Reported by: Yogesh Sapkale
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