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Water resources: reporting and contingency disclosure.

INTRODUCTION

The amount of freshwater on earth has not changed since the age of the dinosaurs. Freshwater accounts for 2.5% of all water on earth and only 1% of all water is usable by humans (USGS, 2012). Human bodies are 60% water, with the brain comprised of 75% water. Globally, more than a billion people in the developing world lack access to fresh water and between 14,000 and 30,000 people die every day from water related diseases (Gleick, 1998). Access to freshwater is widely held as an integral component of economic activity and key to development and business (United Nations, 2012; Morrison & Gleick, 2004). Demand for this limited resource only increases; therefore information on its status and use is of keen interest to many constituents.

Ecosystem services are defined as the processes by which the environment produces resources that we depend upon for life (Ecological Society of America, 2012). Water is an ecosystem service. Although water is a critical component for development and growth, few individuals and businesses are aware of the value of this resource and risks to this resource. Competition for ecosystem services, illustrated by the use of water for hydraulic fracturing (HF) versus the use of water for human consumption highlights issues in valuing water as a resource. HF is an excellent example of the tension that exists between energy security and ecosystem protection. Increased demand for a limited resource such as water also increases concerns about threats to the resource including supply and contaminants.

The value of ecosystem services is often embedded in laws and regulations. Water resource reporting however is fragmented and subject to rules at federal, state, local and watershed levels, resulting in gaps in responsibility and a lack of transparency. Water usage and contamination associated with HF are an excellent illustration of the effect of jurisdictional confusion and the resulting impact on reporting. HF uses millions of gallons of water in the process itself and potential contaminants from drilling can have catastrophic effects on fresh water supplies. HF is exempted from the federal Safe Drinking Water Act (SDWA) (USEPA, 1974) and the Clean Water Act(CWA) (U SEPA, 1972) and an assortment of other regulatory protections for water and land, but subject to state laws that vary from state to state. The resulting lack of coverage at the federal level results in overlaps and regulatory gaps in coverage at the state level, ultimately clouding responsibility. The coverage normally afforded ecosystem services through federal laws and regulations is denied water protection in the case of HF and left to states and municipalities. This is further complicated by the economic opportunities created by innovation in natural gas extraction.

SIGNIFICANCE OF THIS PAPER

Because of the risks posed by HF, the lack of federal oversight and the high stakes involved, states have overridden local or municipal controls related to HF operations. Circumvention of federal laws may lead to popular opposition based on massive uncertainty about risks and impacts, leading to market inefficiencies and negative impacts on competitiveness and energy security. For example, on May 8, 2012 the Vermont legislature voted to ban fracking, putting a 3 year moratorium in place (McDermott, 2012). Also, at the time of this writing, New York Governor Cuomo is deciding whether or not to allow HF in New York State. This paper proposes recognition of potential contingencies related to HF to mitigate perceived risks, acknowledging popular fears and protecting ecosystem services. Risks posed by HF are of interest to accounting because, given the nature of water regulations, the impact on water and possible contingent liabilities posed by HF are difficult to assign. Decisions made at the individual level can affect community water supplies, potentially resulting in contingent liabilities for municipalities. Risks to natural resources may be properly viewed as probable claims against future cash flows or contingent liabilities and, as such, reported by municipal entities. This paper uses HF as an example of an extractive process that could seriously impact ecosystem services and damage life sustaining resources. First, the HF process and regulatory environment are reviewed. Next, reporting for contingencies from a governmental and corporate perspective is examined. Finally, this paper proposes that the confusion and lack of consistency in the regulatory framework results in a lack of assignment of responsibility. The lack of clarity in responsibility leads to suboptimal reporting and a lack of contingency recognition where risk exists. Given the critical nature of water to communities and business and the current national emphasis on obtaining energy security to maintain and enhance national competitiveness, this paper suggests that contingent liabilities should this resource be compromised be recognized and that water resource reporting be included in municipal annual financial statements.

HYDRAULIC FRACTURING

The process of HF is briefly reviewed here to illustrate the complexity of the process in its entirety and the wide range of possible impacts to land, air, water and public health. An understanding of this process is useful to appreciate the broad range of potential impacts and the regulatory framework and impact on reporting. This summary briefly reviews the HF extraction process and supporting processes and concludes with an analysis of environmental impacts attributed to HF.

HF refers to the method used to extract natural gas from subsurface formations. The method was first developed in the 1940s (Mooney, 2011). Vertical wells are drilled to reach gas deposits. When a layer of shale or substrate is encountered, chemically infused water and sand under high pressure helps crack the rock and release the gas. New technology now allows a drill bit to turn as much as 90 degrees and continue to drill for thousands of feet releasing layers of trapped gas formerly inaccessible. In the United States alone, recoverable natural gas deposits are estimated to be 482 trillion cubic feet (U.S. Department of Energy, 2012). In addition to the HF process itself, access roads are built, a two to five acre area is cleared for operations and a storage facility is built. Finally, a drilling rig and processing equipment is installed. Millions of gallons of water are transported to the well pad where the water is mixed with chemicals, some of which are highly toxic. The liquids are mixed with sand and pumped into the well at high pressure, fracturing the rock and releasing the gas. Wells extend as far as 12,000 ft. and can extend horizontally as far as 4,500 ft. It is estimated that between 9% and 35% of the fracking fluid flows back up the well (NYSDEC, 2009) and that the rest of the fluid remains beneath the earth's surface free to move into the surrounding substrate and possibly contaminate drinking supplies.

Effects from HF operations can be wide-ranging. More serious impacts from exposure to air pollutants are associated with toxic emissions from gas leaks, processing and truck exhaust (USEPA, 2012a); surface water impacts from chemical spills and storm water runoff (USEPA, 2012b); and finally groundwater pollution from fracking fluid and gas. In an effort to learn more about the impacts of HF, a search was conducted to identify associated damages, liabilities and litigation. Identification of HF incidents is difficult. HF companies are reported to supply communities with water in perpetuity in exchange for silence (Fox, 2010). Several web-based sources were reviewed to identify HF incidents including American Rivers (American Rivers, 2012), Earthjustice (Earthjustice, 2011), the National Resource Defense Council (NRDC, 2011), the Environmental Protection Agency (USEPA, 2011a), and ProPublica, Inc. (ProPublica, 2011) in addition to a Lexis/Nexis search for litigation related to HF. The most complete sourced listing of HF incidents was found on the Earthjustice website. A review of lawsuits filed in Lexis/Nexis revealed eight cases where most were related to property disputes and only one related to extraction damage. Thus, the Earthjustice data (Earthjustice, 2011) was traced to the original reported source, summarized and roughly classified by incident type. A classification of the 67 incidents by type yields the following breakdown:

The summary above shows the broad range of effects that HF can have and highlights the high proportion (43%) of cases affecting water. Note that earthquakes are also being tied to HF with the increased use of explosives underground to help release gas known as "earthquake induced liquefaction" (USEPA, 2011b). Caution must be used in inferring too much from this sample, however. More discussion of the incidents themselves follows a review of the legal framework.

This data provides part of the background needed to understand HF and why the effects of the extraction process are of concern to a wide range of stakeholders. The next section examines the economic impact of HF and the legal framework including property rights and special regulatory exemptions provided to HF.

ECONOMIC IMPACT

[GRAPHIC OMITTED]

The natural gas industry is transforming energy markets. The significance of the impact of new fracking techniques cannot be overstated. Demand is only expected to increase for the foreseeable future. This surge in natural gas development has spurred $226 billion in spending on pipelines, storage, processing facilities and storage (Loder, 2012). Since 2006, employment in oil and gas extraction has risen on average 5.5% per year (U.S. Dept. of Labor, 2012). Citigroup estimated that a reindustrialization of the U.S. could bring as many as 3.6 million jobs (Loder, 2012). Because gas is difficult and expensive to transport, support industries are expected to grow within the United States. Used primarily for lighting in the past, gas is now used to heat homes, fuel industrial boilers, provide inputs to the petrochemical industry and fuel lorries and buses. Electricity is also generated from gas, generating almost 50% less carbon dioxide than coal. Shale gas, now extractible through HF, contributes 1/3 of America's gas supplies (Economist, 2012). Because this industry is so significant to the economic engine of the United States, protection of ecosystem support services are even more important. The graph that follows vividly illustrates the impact on employment (U.S. Dept. of Labor, 2012).

LEGAL FRAMEWORK

A review of the HF locations shows that most HF occurs in rural areas, although the impacts may affect large urban areas since water moves underground without regard to legal boundaries. Relevant statutes are found in state and federal regulations. Proposed drilling in the Adirondack region in New York State was denied due to potential impacts on New York City water supplies, although the issue is still under study (Kastenbaum, 2012). Generally, rights to private or state owned land are sold to HF companies. Compensation to the landowner does not extend to neighbors who are adversely affected by the HF resulting in a form of "environmental discrimination" since compensated landowners can afford to move away from adversely affected areas whereas their neighbors who may also be adversely affected cannot. In many states, land owners who do not wish to sell are subject to "forced pooling" which allows access to the mineral rights beneath private property even over the objection of the landowners. Thirty-nine states have some sort of pooling law (Appendix 2) that allows drillers to extract minerals from a large area known as a pool. In most states, the minimum pool is approximately 640 acres (Baca, 2012).

Pooling, determined by state law, has long been used in the western US where the oil and gas industries are well established. The use of pooling is relatively new to the eastern US where knowledge of mineral laws and concerns about drilling safety are new. As indicated in Appendix 2, Pooling Statutes by State (Baca, 2012), forms of regulations include forced pooling, compulsory unitization, involuntary unitization, compulsory integration and involuntary pooling. Production companies lease land from landowners and frequently insert a pooling clause into the lease. This clause allows the production company to combine the leased land with other adjoining leased tracts, forming a "pool." One common pool is then used as one underground geological reservoir (Oil and Gas Pooling, 2012).

A review of pooling laws and the list of laws per state in Appendix 2 highlights the differences between states and the complexity of these arrangements. Initiation of a lawsuit should a property or resource loss be incurred would be the responsibility of the landowner. Identification of contingent liabilities at the municipal level would be difficult indeed. Of the 50 states, 11 or 22% have no pooling regulations; 35 or 70% have forced, involuntary or compulsory pooling; and four or < 1% primarily have integration regulations. The next section discusses relevant federal statutes.

Key federal statutes relative to water quality include the Clean Water Act (CWA) (USEPA, 1972) and the Safe Drinking Water Act (SDWA) (USEPA, 1974). The CWA, enacted in 1948 and expanded in 1972, establishes the basic structure for discharge of pollutants and regulation of quality standards for surface waters. The SDWA enacted in 1974 was established to protect drinking water quality whether from above ground or underground sources. Amendments in 1996 required the Environmental Protection Agency (EPA) to perform detailed risk assessments and to consider the best available peer-reviewed science when developing water quality standards. The SDWA also established minimum standards for state programs to protect drinking water from underground injection of fluid.

Given the broad purview of the CWA and the SDWA, it is notable that the Energy Policy Act of 2005 exempted HF from the Acts above, as well as several other environmental laws as follows:
HF Activity             Exempted from the following laws:

All HF production       SDWA (USEPA, 1974)

Well pad construction   National Pollutant Discharge Elimination
                        System (USEPA, 1972)

Site construction,      Comprehensive Environmental Response,
drilling and HF         Compensation and Liability Act (CERCLA, 1980)
production

Oil and Gas             National Environmental Policy Act
Extraction Activity     (USEPA, 1969)

Storage and Disposal    Resource Conservation and Recovery Act of
                        1976 (USEPA, 1976)

Toxic Substances        Emergency Planning and Community
Reporting               Right-to-Know Act (USEPA, 1986)


These significant exemptions result in regulation of HF through a patchwork of state and local laws, with the regulatory "floor" provided by federal regulations absent. Given the interstate nature of water, applying regulations in this fashion poses difficulties. National regulations offer assurances that ecosystem services are protected. Without these assurances, public opposition may result in market inefficiencies and diminution of energy opportunities.

Drafters of the Energy Policy Act of 2005 signed a memorandum of agreement with the three largest HF providers in the U.S., Halliburton, BJ Services and Schlumberger (providing over 95% of HF operations), stating that diesel fuel would not be used in HF. A congressional investigation in 2011 found that the practice of injecting diesel into wells continued and that the industry had injected 32 million gallons of diesel underground. A legal challenge was filed in the U.S. Circuit Court of Appeals in the District of Columbia and the case is currently pending (Soraghan, 2011).

Debate about environmental laws frequently addresses how to balance federal, state and local laws to achieve a desired level of protection. The goal of environmental laws enacted from the 1960s through the 1990s was to protect public resources of air and water in order to protect public health. These laws provided a comprehensive approach to protection. Federal laws providing a national baseline of environmental protection were supported by state laws tailored to particular state concerns providing implementation and enforcement. Liability for non-compliance was clearly defined. A "tragedy of the regulatory commons" (Powers, 2012) describes how companies driven by short term self-interest will pollute a common resource even when all the companies know that their actions will eventually destroy it. The lack of ability to coordinate actions under a national regulatory umbrella can lead to less than optimal outcomes and a lack of national competitiveness. Regulation assigns responsibility that is otherwise avoided. The next section on contingent liabilities examines the current state of contingency reporting which is also under review.

CONTINGENCY REPORTING

Disclosure of contingent liabilities is a complex task. Stakeholders need sufficient information to evaluate the amounts, timing and certainty of future cash flows, therefore, material threats to future cash flows should be disclosed. On the other hand, estimations of amount and probability are uncertain and, in the case of HF liabilities, liability itself is difficult to assign. Disclosure about contingent events may prejudice the outcome of a lawsuit or investors may hold back investment in a company because of risks that never materialize. However, convergence with international accounting standards and changes in Generally Accepted Accounting Principles (GAAP) indicate shifting attitudes and increased transparency toward environmental risk.

In accounting for contingencies, SEC regulations as well as Financial Accounting Standards Board (FASB) standards determine disclosure. Accounting Standards Update (ASU) 450 Contingent Liabilities (FASB, 2008b) and Accounting Standards Codification (ASC) 410-30 Environmental Obligations (FASB, 2010a) govern recognition and disclosure of environmental liabilities. ASU 450 provides GAAP guidance for recognition of contingent liabilities requiring the recording of a contingent liability based on the probability of potential liability and requiring accrual if the liability is estimable and probable (FASB, 2008b). Guidance on recording environmental liabilities is provided by ASC 410-30. As required by ASU 450, accrual of a liability is required if information available before financial statements are issued indicates that it is probable that an asset has been impaired or a liability incurred at the financial statement date and the amount is reasonably estimable. ASC 410-30 contains special provisions for environmental loss contingencies. Generally, if an entity believes it has no current obligation to remediate a condition with a probable or possible environmental impact, then no disclosure is required. However, if the entity is required to report the release of hazardous substances and begin a remediation study or if the assertion of a claim is deemed probable, then the entity must report the loss contingency regardless of outside agency involvement. Receipt of an EPA Information Request Letter normally will cause the liability to become probable (ASC 41030-50-13; ASC 410-30-25-15a). Given that the Energy Policy Act of 2005 effectively removed all HF operations from EPA purview, receipt of an EPA Information Request Letter is highly unlikely. Finally, Statement of Position 96-1 (AICPA, 1997) Environmental Remediation Liabilities, provides additional guidance and benchmarks on when environmental liabilities should be accrued and recognized.

Securities and Exchange Commission (SEC) regulations S-K (SEC, 2000) and Staff Accounting Bulletin 92 (SAB 92) (SEC, 1993) pertain to environmental liabilities for public companies. In regards to the materiality threshold relevant to contingency reporting, companies are required to disclose material effects of compliance with federal, state or local laws (SEC Item 101) including pending or contemplated legal proceedings that meet certain thresholds (SEC Item 103) and uncertainties likely to affect company liquidity or capital expenditures (SEC Item 303). Item 503R requires a discussion of significant risks. Finally, SAB 92 (SEC, 1993) addresses timely recognition of contingent losses with regard to these disclosures. This statement was issued to address the diversity in practice of contingency disclosures (Roberts, 2005). The goal of these standards as with many financial accounting disclosure standards was to provide users with sufficient information to address the amounts and timing of future cash flows and move toward greater consistency in financial reporting.

The ability to provide users with sufficient information to address the amount and timing of future cash flows applies not only to corporations but also to governmental entities. Given the critical importance of water to all life, information regarding cash flows that may be necessary to protect or restore water supplies is of interest to municipal and shareholding constituents.

Proposed changes to contingency reporting under ASU 450 result in greater transparency, earlier full disclosure and more information, enabling users to evaluate risk. SFAS No. 141-(R)-1 Accounting for Business Combinations also requires accrual disclosure of the market value of environmental liabilities. Changes in political and social perceptions of environmental risk are also evident in legislative climate change initiatives, state and regional reporting requirements and in the formation of various state coalitions that require the reduction of corporate carbon emissions. In sum, the movement toward greater transparency in financial reporting and increased concern for environmental risks results in increased demand for accountability. Risks associated with HF, however, are frequently held at the individual landowner level, and until an incident affects community water supplies, the risk goes undetected. The next section examines the incidents summarized in Appendix 1. and HF incidents that may affect municipal water supplies.

HYDRAULIC FRACTURING AND RESPONSIBILITY

The incidents detailed in Appendix 1 result from several aspects of the HF process including transportation, drilling and storage both at the time of drilling and years later. A brief review of HF related litigation in Lexis/Nexis identified seven lawsuits mostly related to property damage and lease conflicts. Only one lawsuit related to contaminated groundwater. This study began as an attempt to identify contingent liabilities resulting from HF and risks to water supplies. The incidents summarized in Appendix 1indicate that the majority of the problems reported involved rural areas, individual landowners and relatively small HF companies. Rural, individual landowners own private wells. A search of municipal annual reports found relatively few HF incidents took place within municipal entities that filed an annual report. Many areas were townships that filed no annual reports. Frequently, when reports were filed, reported items were limited to budgeted and actual revenue and expense. No municipality reported any contingencies related to water. Should New York City's water supply be negatively impacted by HF and the 8 million residents who rely on clean water are affected, a significant contingent liability would surely exist. All of these facts together raise important questions.

Water knows no boundaries. Water resource reporting is generally done by various types of water resource districts, which are organized by watershed and which may include several municipalities or portions of municipalities. Water resource districts are generally funded by fees charged customers. In this exploratory study, no water resource status reporting was identified in municipal reports nor was any contingency related to water identified. Significant HF incidents that garnered examination by the EPA took place in Pavillion, Wyoming and in Dimock, Pennsylvania. Pavilion residents claim that HF ruined their water supply (Solomon & Gold, December 9, 2011). This EPA investigation began in 2008.

Pavillion, WY is unincorporated and has 231 full time residents. The EPA conducted a water quality study in Pavillion from 2008-2010 in response to residents' concerns about the smell and quality of their water. EPA found benzene (a carcinogen) at 246 micrograms per liter exceeding the maximum permitted level of five micrograms per liter. The EPA also found methane, glycols and alcohols "consistent with gas production and hydraulic fracturing fluids" (USEPA, 2010). After examination of possible causes, the EPA said that HF was likely to blame. EPA findings will be peer reviewed before they are made final. These findings are the first governmental findings linking HF with groundwater contamination. The findings sent Canadian Encana Corporation shares down 6% and Chesapeake Energy Corp. shares down 5.1% (Solomon & Gold, 2011). Encana Corp. has been providing fresh water to 21 homes in the area since 2010 and is currently working with EPA and state regulators to find a long term solution. Encana spokesperson, Doug Hock, qualified EPA findings as a probability rather than a definitive conclusion. He stated that Encana testing indicated no issue with contamination from natural gas wells (Solomon & Gold, 2011). This will be an interesting lawsuit to follow in terms of how evidence is evaluated and under what statutes EPA and state regulators file claims.

Dimock, Pennsylvania is located in the Marcellus Shale strand and was one of the earliest sites to claim water impacts from HF. Dimock was featured in the Oscar nominated documentary "Gasland" (Gasland, 2012). EPA sampled water from 61 households and released results on May 11, 2012 indicating that the drinking water was safe. Methane detected in the samples exceeded standards and other cancer causing chemicals were also found that are associated with HF but can also occur naturally (Huffington Post, 2012). The EPA study continues but the difficulties involved in determining the cause of a contamination and the resulting liability are playing out.

CONCLUSION AND OPPORTUNITIES FOR FUTURE RESEARCH

This paper discussed limited freshwater resources and the tension that exists between business and community uses of freshwater, a natural resource. Water regulations were put into effect to protect water resource quality and supply. The SDWA (1974) and the CWAs (1972) were implemented to set national baseline protections for drinking water quality, which could then be enhanced by state and local regulations. HF is seen by many as a key extraction methodology to help achieve energy independence for the United States. The increase in employment and the projected impact on GDP due to this extraction methodology is undeniable. Natural gas will be a major component of the U.S. energy market easily for the next century. However, given the lack of federal oversight and the potentially serious ecosystem service impacts, resulting popular opposition may lead to market inefficiencies and impacts on national competitiveness.

A review of HF incidents resulting in environmental damage illustrated potentially severe impacts on freshwater, which could affect entire communities leading to questions of liability. Since water has no cost basis, it is not recognized as an asset. Yet should water be compromised for an entity such as New York City, for example, a contingent liability would certainly be recognized. Stakeholders include corporate shareholders who may be held liable for a community water supply for an indeterminate length of time and community members who could have no freshwater supply. Both groups require information to address the amounts and timing of future cash flows as well as the status of life-sustaining resources. Contingent liabilities inform stakeholders of just such potential claims against future cash flows. International Accounting Standards require more disclosure related to contingent liabilities than GAAP and movement towards harmonization is working on narrowing this gap. Environmental liabilities also require additional disclosure because of the long term nature of environmental damage. Recognition of such liabilities may ease public opposition and better protect ecosystem services.

From an accounting perspective, contingencies arise when there is a possible future event that could affect the amounts and/or timing of future cash flows. This paper argues that potential impacts on water resources rise to the level of contingency recognition in that the amounts and timing of future cash flows could be impacted for both shareholders and municipal taxpayers. The complex regulatory environment heightens these risks. HF was used as an example of a potential impact on water but it a contingency could result from a variety of development impacts. More disclosure details regarding environmental impacts in corporate annual reports would provide shareholders with more information to draw their own conclusions regarding potential liability. Also, disclosure of the status of key environmental elements to community shareholders would provide information on which community members could make decisions. David Orr, the Distinguished Professor of Environmental Studies and Politics at Oberlin College and author of Ecological Literacy (1991) states that we pay for sustainability whether we get it or not. Providing dependable information regarding the status of life sustaining systems and acknowledging the connection between these systems may be a critical new direction to be considered by financial accounting.

The increase in employment and resulting energy security due to HF need to be viewed within a triple bottom line framework--people, profit and the planet, in order to evaluate organizational and societal success. Interesting avenues for future research include applications of corporate responsibility reporting, contingent liability recognition by municipal entities; the current state of water quality disclosure by water resource districts and its relationship to municipal reporting; and the status of natural resource status reporting in general.
Appendix 1: Hydraulic Fracking Incidents

Location          Type*            Incident

McKean County,    D                200,000 gal of brine illegally
PA                                 dumped in national forest.

St. Clair Town,   D                Detonate dumped into Tubmill
PA                                 creek while drilling

Appomattox, VA    E                Explosion - massive fireball
                                   destroyed 2 homes and injured
                                   5 people

Avella, PA        E                Wastewater impoundment
                                   exploded arsenic and
                                   Tetrachloroethene

Bridgeville PA    E                Two homes explode when well
                                   casing fails

Bridgeville PA    E                Homes exploded when casing
                                   failed

Clark, Wyoming    E                Well blowout released benzene
                                   & chemicals into aquifers

Dish, Texas       E                11 compressors spewed
                                   carcinogenic pollutants into
                                   the air

Hopewell Twn PA   E                Impoundment exploded

Killdeer, ND      E                Blowout leaking 246 bbl. oil

Leidy Twn, PA     E                Natural gas well exploded

Mt. Pleasant,     E                Compressor station caught
PA                                 fire & hatch of tank blew off

Ward Twn, PA      E                Blowout caused uncontrolled
                                   discharge of fracking fluids
                                   onto state land

Caddo Parish,     L                16 cattle dead after drinking
LA                                 fracking fluids; Blowout
                                   forces evacuation

Clearville PA     L                Livestock had motor skills
                                   breakdowns, high levels of
                                   arsenic found

Rifle, CO         L                Effects on animals including
                                   sterilization, still births,
                                   not going into heat.

Tioga Co, PA      L                Cows drank toxic fracking
                                   fluids

Blacksville, WV   O                Nearly all aquatic life killed
                                   along a 30 mile stretch of
                                   Dunkard Creek

Gibbs Hill, PA    O                Physical effects from
                                   drinking/touching water after
                                   fracking

Joyfield Twn,     O                Leak in 1000' deep well caused
MI                                 shutdown of operations

Roaring Branch,   O                Rust colored water in spring
PA                                 and creeks bubbling with
                                   methane gas

Cleburne, TX      Q                Earthquakes blamed on
                                   fracturing

DFW Airport, TX   Q                Wells used to dispose of
                                   byproduct caused earthquakes.

Mt. Pleasant      Q                high pressure natural gas
Town, PA                           escaped causing homes to shake

Asylum Town, PA   S                hydrochloric acid spill

Clearfield        S                Geyser of gas and fracking
County, PA                         fluid spewed into air for
                                   16 hrs.

Dimock, PA        S                Series of spills resulted in
                                   brown water, residents sick,
                                   animal effects

Durango, CO       S                Fracking fluid spill hurts
                                   worker and attending medical
                                   personnel

Granville Town,   S                Hydrochloric acid spill
PA

Monongahela, PA   S                Used fracking fluids were
                                   discharged in the Monongahela.

Parachute, CO     S                Containment pit leaked and
                                   spilled fluids melted into
                                   Colorado river

Penn Town, Pa     S                Underground pipeline erupted
                                   at surface spilling into
                                   wetland

Penn Town, Pa     S                Fracking fluid spilled
                                   contaminating the Munch Creek
                                   Watershed

Penobsquis,       S                Fracking sand spilled -
Canada                             contained radioactive waste

Pine Creek        S                Hauled waste spilled when
Town, PA                           tailgate opened

Troy Town, PA     S                Tanker leaked hydrochloric
                                   acid all along road

Vandergrift, PA   S                Intense pressure forced gas
                                   into abandoned wells

Various PA        S                Residue waste from friction
Towns                              reducer used in natural gas
                                   industry

Alleghany         W                Foamy water, polluted
County NY

NY and PA         W                Well issued foamy chocolate
counties                           water. Well polluted with gas.

Bainbridge, Oh    W                Gas leak, ruined water,
                                   explosion

Bradford PA       W                Murky foul smelling well water
                                   polluted with methane and
                                   metals

Bradford          W                Drinking water contamination
Town PA

Collbran, CO      W                Water contamination; human
                                   tumors

Dayton, PA        W                Well casing failed and fluid
                                   leaked into another well

Fort Lupton, CO   W                Tap water caught on fire -
                                   methane

Hamilton          W                Well contaminated with methane
Town, PA

Hickory, PA       W                Greasy water, foul smell,
                                   goats died

Hill County,      W                Water supplies contaminated
Texas                              with toluene after drilling,
                                   livestock dead

Huerfano          W                Water contaminated with
County, CO                         methane

Johnson           W                Well contaminated after
County, TX                         fracturing

Kushequa, PA      W                Explosive levels of methane
                                   and ethane seeped into water
                                   supplies

Logan             W                Water contaminated BTEX,
Mountain, CO                       benzene, toluene,
                                   methylbenzene and xylene

Muncy, PA         W                Methane contaminated private
                                   wells

Pavillion,        W                Well contaminated methane,
Wyoming                            hydrocarbons, lead, copper
                                   and toxic 2-BE

Rock              W                Pit leaked, ruins water,
Springs, WY                        rancher hospitalized

Romance, WV       W                Contaminated drinking water

Romance, WV       W                Contaminated drinking water;
                                   people suffer neurological
                                   symptoms

Rosebud,          W                Faucet hissed, smoke emitted,
Alberta CA                         water caught on fire (methane)

Silt, CO          W                Water contamination with
                                   methane and benzene

Sublette          W                Well contained benzene
County, WY                         contamination

Tarrant           W                Groundwater contamination
County, TX                         after fracking

Varick, NY        W                Water cloudy, gray after
                                   drilling

Washington        W                Water contaminated by nearby
County, PA                         fracturing

Waterville, PA    W                Discharge into creek got into
                                   water table

Wetaskiwin,       W                Water contamination; cows died
Alberta CA

Wise County, WV   W                Drinking water contamination -
                                   benzene

(Earthjustice, 2011)

*Type             Classification

D                 Dumping

E                 Explosions

L                 Livestock
                  effects

O                 Other

Q                 Earthquakes

S                 Spills

W                 Water
                  contamination

Appendix 2: Pooling Statutes by State

State            Regulation              Legal reference & Section

Alabama          Forced pooling and      http://bit.ly/c64zdw
                 compulsory              400-1
                 unitization

Alaska           Involuntary             http://bit.ly/fpcdiv
                 unitization             31.01.110

Arizona          Compulsory              http://bit.ly/ewnUd5
                 unitization             27-506

Arkansas         Compulsory              http://bit.ly/jDYN7y
                 integration             15-72-303

California       Compulsory              http://bit.ly/gyXrTf
                 unitization             3320.2

Colorado         Involuntary pooling     http://bit.ly/i9PG36
                                         34-60-116

Connecticut      NA                      NA

Delaware         Forced Pooling          http://Lusa.gov/h0ztec
                                         7-7000-7503

Florida          Forced Pooling          http://bit.ly/iiyfnJ
                                         377.28

Georgia          Compulsory              http://bit.ly/hffas7
                 unitization             12.4.45

Hawaii           NA                      NA

Idaho            NA                      NA

Illinois         Integration pooling     http://1.usa.gov/ep7bKB
                 and compulsory          240.131
                 unitization

Indiana          Integration and         http://Lusa.gov/h4QoWZ
                 forced pooling          14-34-9

Iowa             Compulsory              http://bit.ly/gNCAuN
                 unitization             458A.8

Kansas           Compulsory              http://bit.ly/gwVeFU
                 unitization             55-703

Kentucky         Involuntary pooling     http://bit.ly/gpUnIp
                                         353.64

Lousiana         Compulsory              http://bit.ly/fwzz1n
                 unitization             30.9

Maine            NA                      NA

Maryland         NA                      NA

Massachusetts    NA                      NA

Michigan         Compulsory pooling      http://Lusa.gov/dSpl1E
                                         324.304

Minnesota        Compulsory              http://bit.ly/e227NO
                 unitization

Mississippi      Compulsory              http://bit.ly/gMVrvM
                 unitization             53-3-7

Missouri         Involuntary pooling     http://Lusa.gov/ha1qEq
                 and statutory           259.110
                 unitization

                                         http://Lusa.gov/fM8vAi
                                         50-5.010

Montana          Integration pooling     http://bit.ly/hmUvIJ
                 and compulsory          82-11-202
                 unitization

Nebraska         Involuntary pooling     http://bit.ly/gHYMt8
                                         57-909

Nevada           Compulsory              http://bit.ly/flAI8Y
                 unitization             522.0824

New Hampshire    NA                      NA

New Jersey       NA                      NA

New Mexico       Forced pooling and      http://bit.ly/eNSTWK
                 Statutory unitization   19.2.100.52

New York         Compulsory              http://bit.ly/dS72I0
                 integration and         23-0901
                 unitization

North Carolina   NA                      NA

North Dakota     Integration of          http://bit.ly/i27qG9
                 fractional tracts       38-08-08

Ohio             Mandatory pooling       http://Lusa.gov/fIXqIz
                                         1509.27

Oklahoma         Compulsory              http://bit.ly/hILwOB 287.4
                 unitization and
                 forced pooling

Oregon           Compulsory              http://bit.ly/h0QfVV
                 integration             632-010-0161

Pennsylvania     Compulsory              http://bit.ly/ehuJYW 79.33
                 integration

Rhode Island     NA                      NA

South Carolina   Compulsory              http://bit.ly/hegsVx
                 Integration             48-43-340

South Dakota     Compulsory pooling      http://bit.ly/fbTvcb 45-9
                 and compulsory
                 unitization

Tennessee        Forced integration      http://bit.ly/gdh7OA
                                         1040-5-1-.01

Texas            Forced pooling          http://bit.ly/gRSnST
                                         102.017

Utah             Involuntary pooling     http://bit.ly/gEQe49
                 and compulsory          40-6-6.5
                 unitization

Vermont          Forced pooling          http://bit.ly/iomLEL
                                         14-29-523

Virginia         Compulsory pooling      http://bit.ly/f9B0aF
                                         45.1-341.21

Washington       Compulsory              http://Lusa.gov/gpIUzc
                 unitization             78.52.250

West Virginia    Mandatory pooling       http://bit.ly/fEy1Jd
                                         22C-9-7

Wisconsin        NA                      NA

Wyoming          Compulsory pooling      http://bit.ly/caIeA2
                                         30-5-109


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Christine P. Andrews, Salem State University Jayanti Bandyopadhyay, Salem State University
TABLE 1
Hydraulic Fracturing Incident Summary

Type   Classification        Count   Percent

D      Dumping               2       3%

E      Explosions            11      16%

L      Livestock effects     4       6%

O      Other                 4       6%

Q      Earthquakes           3       4%

S      Spills                14      21%

W      Water contamination   29      43%

       Total                 67      100%
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