Frackers Fund University Research That Proves Their Case

Pennsylvania remains the largest
U.S. state without a tax on natural gas production, thanks in
part to a study released under the banner of the Pennsylvania
State University

The 2009 report predicted drillers would shun Pennsylvania
if new taxes were imposed, and lawmakers cited it the following
year when they rejected a 5 percent tax proposed by then-
Governor Ed Rendell.

“As an advocacy tool, it worked,” Michael Wood, research
director with the non-profit Pennsylvania Budget and Policy
in Harrisburg, Pennsylvania, said in an interview. “If
people wanted to find a reason to vote against having the
industry taxed in that way, that gave them reason to do it.”

What the study didn’t do was note that it was sponsored by
gas drillers and led by an economist, now at the University of
Wyoming, with a history of producing industry-friendly research
on economic and energy issues. The researcher, Tim Considine,
said his analysis was sound and not biased by industry funding.

As the U.S. enjoys a natural-gas boom from a process called
hydraulic fracturing, or fracking, producers are taking a page
from the tobacco industry playbook: funding research at
established universities that arrives at conclusions that
counter concerns raised by critics.

Buying Prestige

Cary Nelson, president of the American Association of
University Professors, who made the tobacco analogy, said
companies and their trade associations are “buying the
prestige” of universities that are sometimes not transparent
about funding nor vigilant enough to prevent financial interests
from shaping research findings.

The Penn State report is not the only example.

A professor at the University of Texas at Austin led a
February study that found no evidence of ground-water
contamination from fracking. He did not reveal that he is a
member of the board of a gas producer. Company filings examined
by Bloomberg indicate that in 2011, he received more than
$400,000 in compensation from the company, which has fracking
operations in Texas.

A May report on shale gas from the State University of New
York at Buffalo
contained errors and did not acknowledge
“extensive ties” by its authors to the gas industry, according
to a watchdog group. One of the authors was Considine, the same
economist who wrote the Penn State study.

Growing Problem

“It’s a growing problem across academia,” Mark Partridge,
a professor of rural-urban policy at the Ohio State University,
said in an interview. “Universities are so short of money,
professors are under a lot of pressure to raise research funding
in any manner possible.”

In 2008, private sources provided about 6 percent of all
academic research funding, according to a June report from the
Washington-based AAUP. The figure excludes gifts, endowments for
new faculty appointments, consulting or speaking fees,
honoraria, seats on company boards, commercial licensing
revenue, or equity in startups.

Controversy has followed when research too closely supports
a corporate agenda. Litigation against tobacco companies helped
reveal a decades-long effort that relied on academic research to
suppress the dangers of smoking. Today, schools of public health
at Columbia University, Harvard, Johns Hopkins, and others ban
tobacco funding, according to the association’s report.

Inside Job

More recently, the 2010 documentary film “Inside Job,”
reported that the financial-services industry paid university
economists to testify in Congress and in antitrust cases, serve
on boards of directors, and give speeches to the companies and
industries they study, without disclosing the inherent conflicts
of interest.

As questions have arisen about the environmental and
economic implications of fracking, the same pattern is

Fracking, in which millions of gallons of chemically
treated water and sand are forced underground to break shale
rock and free trapped gas, has lowered energy prices, created
jobs, and enhanced national security, according to a task force
formed by President Barack Obama’s Energy Secretary Steven Chu.
It is displacing coal, lowering U.S. output of pollution blamed
for global warming.

Earthquake Links

Critics say the benefits may not outweigh the environmental
and health risks. Fracking has been linked to groundwater
contamination in Pennsylvania, high ozone levels in Wyoming and
to headaches, sore throats and difficulty breathing for people
living close to wells in Colorado. Burying wastewater from
drilling has been linked to earthquakes in Ohio, Arkansas and
other states.

Some of the controversies on fracking research center on
the Marcellus Shale, a gas-rich geological formation which
stretches from New York to Tennessee.

In 2009, with drilling interest on the rise in
Pennsylvania’s share of the Marcellus, Rendell proposed a
severance tax similar to one in West Virginia – a 5 percent levy
on the value of gas produced plus 4.7 cents for every 1,000
cubic feet. The tax would have generated about $100 million in
its first year. Opponents cited the Penn State study, which
found that drilling would decline by more than 30 percent under
the tax. Considine, a former professor of energy and
environmental economics at Penn State’s College of Earth and
Mineral Sciences, was the lead author.

Drew Complaints

“The high level of drilling activity in Pennsylvania is a
function of relatively lower taxes,” according to the report.
“This competitive advantage should be maintained.”

The study drew complaints prompting William Easterling,
dean of Penn State’s College of Earth and Mineral Sciences, to

The section on a severance tax “should be more scholarly
and less advocacy-minded,” he wrote in a June 9, 2010 letter to
the Responsible Drilling Alliance, a Williamsport, Pennsylvania,
group that supports a tax. Considine’s treatment of the issue
may have “crossed the line between policy analysis and policy
advocacy,” Easterling wrote.

“We appeared to them as an institution to be saying that
we support fracking,” Easterling said in an interview. “So we
just needed to clarify that. Once we did they weren’t completely
happy campers, but at least they knew that we weren’t for

‘Clear Error’

Easterling also cited as a “clear error” the failure to
disclose industry funding in the initial July 24, 2009 report.
An Aug. 5 version identified the sponsor, Marcellus Shale
Coalition, which provided a grant of about $100,000. News
reports referred to the work as a Penn State study.

The Marcellus Shale Coalition, represents about 300
companies and provides information to policy makers, regulators
and media on the “positive impacts” of gas development,
according to its website.

“The gas industry is free to put out the facts the way
they see them, but it’s different when it masquerades behind an
academic institution,” Myron Arnowitt, Pennsylvania state
director for the environmental group Clean Water Action, said in
an interview.

“We would agree that whether or not this study came out
with a Penn State seal on it or not, that it’s not appropriate
to call it a Penn State study,” Easterling said. “The
implication is that Penn State as an institution has done a
study that has the imprimatur of Penn State.”

Legislative Debate

At the statehouse in 2010, State Representative William Adolph, a Republican from Springfield, Pennsylvania, cited
Considine’s work during a debate over the proposed drilling tax.
Imposing the tax would slow the growth of shale gas and threaten
new jobs, Adolph said.

The study, Adolph said, revealed that the industry had
created tens of thousands of jobs. “They predict another
110,000 in the next 2 years,” he said.

Adolph did not reply to a request for comment from
Bloomberg News.

Representative Brian Ellis, a Republican from Butler, and
then co-chair of the house Natural Gas Caucus, formally released
the study at a July 27, 2009 press conference.

Butler, about 30 miles north of Pittsburgh, is seeing the
benefits of gas drilling in new jobs and more business for
restaurants and hotels. Gas drillers already pay state corporate
taxes, Ellis said.

Impact Fee

“The ultimate question is do you believe that the folks
doing the study are credible or not, and generally speaking, I
have a lot of faith in the studies that have come out of Penn
State,” Ellis said in an interview.

Rendell eventually dropped the severance-tax proposal, and
Pennsylvania remains the largest gas-producing state without
one, according to the National Conference of State Legislatures.
Instead, the state this year approved a fee on drillers that
municipalities can elect to charge to cover road damage and
other impacts.

The impact fee will bring in about $85 million this year
compared to $200 million under a 5 percent tax, assuming a gas
price of $2.50 per thousand cubic feet, according to the
Pennsylvania Budget and Policy Center, a non-partisan research
group that provided analysis on state tax and budget issues. The
fee will peak at about $200 million a year, while the tax could
have reached $500 million in 2015 if gas prices rebound to

Found ‘Troubling’

“I myself was taken aback by Penn State’s being used by
the drilling industry to support their opinion here,”
Representative Greg Vitali, a Haverford, Pennsylvania, Democrat,
said in an interview. “I found it troubling.”

Considine said he had left Penn State for the University of
Wyoming while the report was being produced and did not know why
it was initially released without disclosing its industry

“There are so many opponents of shale gas drilling in that
region that they see anything that’s funded by industry, in
their view it’s biased,” Considine said in an interview. “I

Considine, who received a Ph.D. in economics from Cornell
, has also worked as an economist at Bank of America,
and as the lead analyst for natural gas deregulation on the U.S.
Congressional Budget Office, according to his University of
Wyoming profile.

Economic Impact

In a 2011 study of the economic impacts of the Marcellus
Shale in Pennsylvania, Timothy Kelsey, professor of agriculture
economics at Penn State, found that drilling created as many as
23,884 jobs in 2009, less than half the number in Considine’s
report. Considine assumed that landowners who got money from
drillers live in Pennsylvania — according to Kelsey 7.7 percent
live out of state — and that they would spend windfall bonus
payments from leasing their property as they would ordinary
income, Kelsey said.

“What we found out by surveying folks is they’re saving
half of those dollars,” Kelsey said. “Because of that, the
economic impact in any one year is going to be a lot less.”

A 2012 update of Considine’s economic analysis for
Pennsylvania will assume that half the money going to landowners
is spent and half saved, a shift from earlier reports that
assumed 80 percent would be spent, according to Kathryn Klaber,
president of the Pittsburgh-based Marcellus Shale Coalition.

“Is it materially going to affect the results?” Klaber
said in an interview. “Absolutely not. The fact that new
information is being taken into account by Considine to
continuously improve the assumptions, that’s exactly what we
want him to be doing.”

Industry Expertise

“We want somebody who’s got expertise in the industry to
run standardized models and be able to interpret them with
expertise,” Klaber added. “I think we got it right. To have an
independent institution run the analysis to give all
stakeholders a sense of the order of magnitude of what kind of
jobs and economic impacts it’s brought with it.”

In Texas, Charles Groat, associate director of the Energy
Institute at the University of Texas and former Director of the
U.S. Geological Survey, proposed a study to help state
regulators manage shale gas issues. He selected the researchers,
edited its summary and presented it to the American Association
for the Advancement of Science on Feb. 16.

Plains Exploration

Groat also sits on the board of Plains Exploration
Production Co. (PXP)
, a relationship he didn’t disclose in the report,
to his boss, or at the Feb. 16 meeting. As a board member, Groat
receives 10,000 shares of restricted stock each year, according
to company reports. His holdings as of March 29 totaled 40,138
shares, worth $1.6 million at the July 19 closing price. He also
receives an annual fee, which was $58,500 in 2011. Houston-based
Plains Exploration is fracking in shale formations in Texas,
company spokesman Ed Memi said in an e-mail.

Raymond Orbach, director of the Texas university’s Energy
Institute, said he learned of the connection from a Bloomberg
reporter’s inquiry.

The report concludes that while there have been surface
spills of fracking wastewater, there is no evidence of
groundwater contamination from fluids injected thousands of feet
below the surface.

Press Release

That produced the headline on the university’s press
release that got news media attention:

“New Study Shows No Evidence of Groundwater Contamination
from Hydraulic Fracturing,” according to the university’s Feb.
16 press release. The study cost about $270,000, none of which
came from industry sources, according to university spokesman
Gary Rasp.

“This report got more traction with the media because it
was framed as independent,” Kevin Connor, director of the
Public Accountability Initiative, a Buffalo non-profit that
focuses on corruption in business and government, said in an
interview. Connor’s group, which today released a report on the
Groat study, receives funding from organizations such as the
Sunlight Foundation and United Republic, which favor greater
transparency in government.

The report can’t be viewed as industry friendly because it
includes negative impacts of fracking, Orbach, a former under
secretary at the U.S. Energy Department, said. Still, Groat’s
failure to disclose his ties to Plains Exploration was an
“issue,” Orbach said.

‘No Idea’

“To be honest, we had no idea,” Orbach said in an
interview. “In the future we should have an asterisk or
something that would indicate his presence on the board.”

In a subsequent e-mail, Orbach added, “while I believe
this should have been disclosed when the study was released, I
do not believe his service on the board had any impact at all on
the findings.”

Sections of the report dealing with the regulation of
fracking were written by Hannah Wiseman, assistant professor at
Florida State University College of Law. Wiseman said she knew
of Groat’s industry ties yet felt no pressure to deliver
industry-friendly findings.

In her section of the report, Wiseman found “significant
gaps” in state oversight of fracking.

Groat offered a more enthusiastic endorsement of state
efforts when he presented the report Feb. 16.

“We conclude that there isn’t the need for pervasive new
regulatory frameworks,” Groat said. “There’s a need for some
supplementing within the states that regulate most of this, but
by and large they’re doing a decent job.”

No Modifications

Wiseman, who called states’ efforts to improve regulation
“spotty,” continues to work on studies for the Texas

“States need to improve many of their regulations,”
Wiseman said in an interview. “It’s hard for me to comment on
my boss’s characterizing.”

Groat said he did not try to lead the researchers to
industry-friendly conclusions.

“The study results were determined by the individual
investigators,” Groat said in an e-mail. “I made no
modifications or alterations of their findings, some of which
were not particularly pleasing to the shale-gas industry.
Disclosing my Plains board position would not have served any
meaningful purpose relevant to this study.”

Nelson, of the American Association of University
Professors, said the university needs to go further.

‘Obvious Conflict’

“It’s more than an asterisk,” Nelson said in an
interview. “They should be thinking about having regulations in
place that would prevent someone with an obvious conflict of
interest from playing certain roles.”

Considine is now a professor of economics in the School of
Energy Resources at the University of Wyoming. The school and
the university rely heavily on funding from the state’s oil, gas
and coal producers.

“You can’t quantify how important minerals are to the
state and to the University of Wyoming,” Renny MacKay, a
spokesman for Republican Governor Matthew Mead, said in an
interview. “You’re looking at a state with no income tax, no
corporate tax. We’re all 100 percent reliant on minerals here in

Wyoming collects a 6 percent severance tax on oil and
natural gas production.

In addition to state funding, the School of Energy
Resources last year received about $5.75 million in gifts from
energy companies, according to its director Mark Northam.

Marathon Oil

In April, Houston-based Marathon Oil Corp. (MRO) announced a $1
million gift to the university. The contribution “is consistent
with Marathon Oil’s focus on supporting key educational
initiatives in communities where we operate,” Jim Bowzer, vice
president of Marathon’s north American production, said in a

Calgary-based Encana Corp. (ECA) which operates gas wells in
Wyoming’s Jonah field, has given $7 million dollars to the
university over the past six years to better train students for
the oil and gas sector, according to Encana spokesman Doug Hock.

Corporate gifts are used for buildings, research equipment,
scholarships or fellowships and help foster “a better educated
student because we train their work force,” Northam said.
Research priorities at the school are set by a council appointed
by the governor that in 2011 included representatives from
Anadarko Petroleum Corp. (APC), Arch Coal Inc. (ACI), Rio Tinto Group, the
world’s third-largest mining company, General Electric Co. (GE), and
Denver-based gas producer QEP Resources Inc. (QEP)

Corporate Generosity

The corporate generosity has some worried about the impact
on academic independence.

“There’s no question that the oil and gas industry is
approaching the University of Wyoming with a great deal of
walking-around money and directly funding some of these
departments with the apparent agenda of influence peddling, and
it seems to be working very well for them,” Erik Molvar, a
wildlife biologist with the Biodiversity Conservation Alliance
in Laramie, Wyoming, said in an interview.

Hock of Encana rejected such characterizations of corporate
involvement in research.

“It is unfortunate and there’s nothing we can do about
that,” Hock said in an interview. “We want good science and we
want to build a a skilled workforce.”

Considine has conducted contract research for industry
groups such as the American Petroleum Institute and the Wyoming
Mining Association. In a 2009 report for the mining group,
Considine said Wyoming coal would lower U.S. energy costs by
$280 billion a year. Global warming emissions from burning coal
could be reduced by planting trees and using technology still in
development to capture carbon dioxide from smokestacks, he said
in the report.

Marcellus Shale

In a 2010 report for the Washington-based petroleum group,
Considine said Marcellus Shale gas in New York, Pennsylvania and
West Virginia would generate $16 billion in economic output and
184,000 jobs. The project, which relied on the same computer
model used in the Penn State report, was done “during the
summer when he not obligated to the university, so in a way it’s
consulting,” the School of Energy Resource’s Northam said.

Last year, Considine co-wrote a report for the free-market
Manhattan Institute that said gas drilling in New York would
trigger $11.4 billion in economic output and create 90,000 jobs.
In a 2011 year-end message to donors, the institutes’s
president, Lawrence Mone, called its work crucial as “record
federal spending and a seemingly endless stream of job-
destroying policies continue to undermine economic recovery.”

WildEarth Guardians

“He’s definitely someone that we would just consider to be
an industry propagandist,” Jeremy Nichols, director of the
climate program at the conservation group WildEarth Guardians,
said in an interview. “There’s not even an air of objectivity
to it.”

“This whole ideal of industry funding biasing research is
preposterous,” Considine said. “You look at universities all
around the country. There are billions of dollars flowing from
companies to do basic RD.”

Regulators in New York have been weighing environmental
rules on fracking since 2008. New York Governor Andrew Cuomo is
considering a plan that would allow fracking in five counties
near the Pennsylvania border.

In April, the newly formed Shale Resources and Society
Institute at the State University of New York at Buffalo found
that drillers in Pennsylvania had reduced by half the rate of
blowouts, spills and water contamination since 2008. Potential
environmental problems could be “entirely avoided or
mitigated” under New York’s proposed rules, according to the
shale institute’s report. Considine was the lead author.

Public Accountability

Connor of the Public Accountability Initiative sees
similarities to Considine’s Penn State reports.

“You’ve got the authority of a public research university
being used to publish research by individuals with a strong bias
to the natural-gas industry,” Connor said. “It almost appears
that work for this report had already been done and the
University of Buffalo label just applied to it.”

Meanwhile, the shale resources institute is soliciting
corporate partners, seeking $1.14 million to launch a “landmark
effort to leverage the safe, sustainable, economic development
of shale gas,” according to a document Connor said he
downloaded from the group’s website.

“One of the amazing things about this institute is that it
does not mention the words public health as something that will
be considered,” Jim Holstun, an English professor and one of
about 20 members of the newly formed University at Buffalo
Coalition for Leading Ethically in Academic Research, a group
formed in response to the drilling report, said in an interview.

Environmental Accidents

Contrary to the report’s central finding, the rate of major
environmental accidents in Pennsylvania has increased since
2008, according to an analysis by Connor’s group.

In a May 16 blog post, Scott Anderson, senior policy
adviser for the Environmental Defense Fund in Austin, Texas,
called the report’s omission of administrative violations that
had yet to cause environmental damage “questionable.”

The report, which identifies Considine by his title at the
University of Wyoming, doesn’t disclose his prior work for
industry groups. Considine said he did the study as part of his
responsibilities at University of Wyoming. It was cited by
Michael Krancer, Secretary of Pennsylvania’s Department of
Environmental Protection, in his May 31 testimony at a House
hearing on the impacts of new federal regulations on fracking.

“There is a compelling case that Pennsylvania state
oversight of oil and gas regulation has been effective,”
Krancer said in prepared remarks referring to the University at
Buffalo study.

History Lacking

Nelson of the American Association of University Professors
said he is planning to update the group’s June report with a
section on fracking.

“In the case of the Buffalo fracking report, it’s that
history that’s lacking,” Nelson said. “They were able to brag
this didn’t have any industry support.”

The idea for the shale resources institute came from
faculty members following a series of seminars last year on
fracking, according to E. Bruce Pitman, dean of the College of
Arts and Sciences at the University at Buffalo. The University
at Buffalo is an “honest broker” in the state-wide debate
about gas drilling, he said.

“There is a debate going on here but the fact of the
matter is that nothing was hidden,” Pitman said in an
interview. “Everybody knows where all the authors come from.
All the data that’s used in the report was absolutely out there.
People can then make up their minds.”

New York

Environmental groups such as the Sierra Club say fracking
in New York threatens drinking water sources, including the
reservoir that supplies New York City with 1.3 billion gallons
(4.9 billion liters) a day.

Industry-funded studies may be double counting the effects
of drilling activities and using unrealistic assumptions about
spending and hiring, according to Partridge of the Ohio State
University. A 2011 report from the industry-funded Ohio Oil
Gas Energy Education Program
found that drilling may “create
and support” more than 200,000 jobs in Ohio over four years, 10
times more than Patridge’s estimate in a study he co-wrote in
the same year.

“We need a lot more disinterested research than we’re
getting,” Nelson said. “We ought to be making policy on the
basis of truly independent research. Not research where people
have a reason to want to please the funder.”

To contact the reporter on this story:
Jim Efstathiou Jr. in New York at

To contact the editor responsible for this story:
Jon Morgan at

Article source: http://www.bloomberg.com/news/2012-07-23/frackers-fund-university-research-that-proves-their-case.html

Short URL: http://refinerynews.com/?p=41082

Posted by on Jul 23 2012. Filed under Headlines. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Leave a Reply

Recently Commented