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Report: Fracking Accidents Could Pose Huge Costs to Taxpayers

By German Lopez · July 24th, 2013 · City Desk

Ohio taxpayers could be on the hook for millions of dollars if something goes wrong at an oil and gas drilling operation, according to a report released on July 18 by advocacy group Environment Ohio.

Recent technological advancements have spurred a boom in fracking, an extraction technique that involves pumping millions of gallons of water underground to unlock oil and gas reserves, leading to hundreds of new wells in Ohio and thousands more around the nation.

When oil and gas companies obtain a permit to build a fracking well, they typically have to provide some financial assurance to the state in case something goes wrong. If a well operation is completed without a problem, the cost is returned to the operator.

If something goes wrong, the company has to fix the mess before it can get its money back.

But Environment Ohio finds companies in Ohio only have to secure $5,000 in upfront bonds per well. That’s not enough for a company to fear the financial consequences of a disaster, which means it could act recklessly with little disincentive, according to the report.

The report says that could pose a huge cost to taxpayers: Simply reclaiming a well and its property can cost hundreds of thousands of dollars. Actually paying for damages, such as contaminated groundwater and ruined roads, can cost millions. Under normal circumstances, private and public entities could sue for the damages, but that’s unrealistic if a well operator goes bankrupt or is otherwise unwilling or incapable of paying.

In what it calls “common sense” reforms, Environment Ohio says the state should impose more assurances for longer periods of time. The organization favorably cites other states that require $250,000 in upfront bonds — much higher than Ohio’s $5,000. 

The report also finds that insurance requirements in the state are weak, with operators required to fulfill a $5 million liability cap regardless of whether they’re running one well or 100. The organization recommends Ohio work to build stricter financial and regulatory safeguards. 



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