You are browsing the archive for regulation.

by danps

Naturally occurring, but not with wanderlust

6:19 am in Uncategorized by danps

Cross posted from Pruning Shears.

About a year ago a local family began getting flammable water. The fact that their house’s recorded methane levels (along with their sink) shot up shortly after fracking began nearby was considered maybe not coincidental, so the Ohio Department of Natural Resources (ODNR) looked into it. Before the agency did, though, it let the public know which way it was leaning: “Methane is naturally occurring in this portion of the state, and the water well in question was found to be drilled into shale, which may have led to these increased levels.”

Isn’t the point of an investigation to try and understand the cause, not to confirm one’s hunches? It doesn’t inspire a lot of faith in the impartiality of the investigation to start by declaring the expected outcome. (I noticed the same thing when North Dakota State Environmental Health Chief Dave Glatt said he didn’t expect to find groundwater contamination at their recent oil spill. Oil and gas regulators seem a little eager to pre-exonerate the industry they are supposed to be keeping an eye on.)

ODNR concluded its investigation a few weeks ago, and the result was no surprise to anyone who had seen the agency tip its hand at the outset:

An investigation by the Ohio Department of Natural Resources recently concluded that the gas in the Kline’s’ water well was chemically different from the gas produced by a Mountaineer Keystone oil and gas well 1,500 feet southeast of the house.

An Oct. 18 agency report said methane in the Kline’s’ well matched the methane found in natural gas that leaks from shallow underground sources into groundwater.

“Up to 40 percent of the water wells within the area of the (shale) drilling have some concentration of methane in them,” said Mark Bruce, a Department of Natural Resources spokesman. “Methane is naturally occurring.”

The verbatim use of “methane is naturally occurring,” in addition to being a favored pro-fracking talking point, is not especially relevant when discussing the impact of fracking. No one disputes that methane occurs naturally, or that some water supplies have high levels of it that long pre-date fracking. The relevant question (or one of them) is: what happens to that naturally occurring methane when heavy industrial activity begins nearby?

Setting off explosions below the earth and repeatedly forcing millions of gallons of chemical cocktails into the ground makes it more permeable. We already know that fluids in shale fields migrate much farther and much faster than previously thought, because busting up the earth makes it more porous. Saying that these fluids and gases are naturally occurring is trivial; stupid even. What matters is not whether they are naturally occurring but whether they are naturally migratory:

“It challenges the view that natural gas, and the suite of hydrocarbons that exist around it, is isolated from water supplies by its extreme depth,” said Judith Jordan, the oil and gas liaison for Garfield County, who has worked as a hydrogeologist with DuPont and as a lawyer with Pennsylvania’s Department of Environmental Protection. “It is highly unlikely that methane would have migrated through natural faults and fractures and coincidentally arrived in domestic wells at the same time oil and gas development started, after having been down there … for over 65 million years.”

It’s entirely possible the Kline’s well was drilled into shale, and also that the methane is chemically different from that at the frack operation. That (possibly) shale-drilled well was working just fine until a year ago. Then the drilling began, and whoopsie their water began catching fire. Determining that the methane did not come directly from the drilling operation is only part of the answer. The other part, still unanswered, is whether a – naturally occurring! – pocket of methane was loosened up in newly permeable ground and migrated to the family’s property.

(A gas migration would be more like a tornado than an earthquake – going in a line and only affecting land in its path. Saying “it couldn’t be the drilling because other nearby houses were unaffected!” makes as much sense as saying a tornado didn’t level a house because neighboring houses were undamaged.)

It’s too late to know if that is in fact what happened, because there is no mapping of what the ground looked like prior to drilling. The fact that this entire area of hazard is unaccounted for doesn’t reflect very well on ODNR, though. If all they do is make sure contamination doesn’t come directly from operators, declare that it’s naturally occurring, and then wash their hands of it, Ohioans will have to bear the rest of the risk on their own. Given how easy it is to shuttle between the agency and the industry, that might bode well for regulators’ employment prospects once they leave. But it sure doesn’t do much for citizens.


NOTE: As of this writing, the report is not available on the ODNR web site.

Read the rest of this entry →

by danps

The incredible shrinking Internet

5:31 am in Uncategorized by danps

Cross posted from Pruning Shears.

A couple of weeks ago, Yves Smith’s link roundup included a McClatchy piece about consumers dropping cable TV. She remarked: “Trust me, when you seem more consumers ditching cable, you’ll see the pipeline providers start charging based on how much you download a month.” Caps really aren’t necessary, though; connections are already capped by speed. You can’t download any more than the connection will allow. Consumers should be able to buy a connection at a set price, and the ISP should charge for it based on how much data it could transmit. Charge more for faster speeds, less for slower ones.

The big providers don’t want to do that, though, so instead they are trying to figure out ways to charge customers more for what they already pay for. And the amounts they are charging are exorbitant. For instance, Verizon Wireless’ HomeFusion service has a top tier of $120 a month for 30 GB, with a $10 charge for every gigabyte over that. Since, as the article notes, Netflix can take up to 700 MB for an hour of streaming, that cap will get blown through pretty quickly. And it’s completely inadequate for the next generation of video: you can forget about streaming a movie that takes 45 to 60 GB.

That’s not all of the bad news, either. Internet connections have traditionally worked like this: Select your package, pay for it, use it for what you want. That’s what you do with your ISP. That’s what Google does too. Everyone pays to get on. But now there’s an emerging talking point that web sites (for some reason called “edge providers” in a bit of unhelpfully obscure tech lingo) are somehow not paying to get on. Verizon is before the FCC right now arguing that prices are higher because edge providers – which, remember, already pay to get on the Internet – do not also pay to get off. In other words, when you use your Verizon connection to watch a YouTube video, YouTube is also somehow bundled in as a Verizon customer.

The reason they are doing this is because they want to do away with net neutrality. If lots of their customers are getting data from site A then site A is a problem. If only they didn’t have to connect their customers to it, or maybe if they could charge the site a premium! And that’s where usage based broadband pricing comes in. If Verizon succeeds against the FCC and net neutrality is gutted, web site owners face the prospect of being charged extra by providers for the privilege of delivering content to customers.

We are already seeing a version of that as providers make deals to serve certain content free of data cap usage. And when you’re on a plan that has a 30 GB per month cap with $1 for every GB over, that’s a pretty big deal. It begins to make sense to confine yourself to those sites that your ISP doesn’t count against your cap just to make sure you don’t accidentally blow through it. Of course, some take a more sanguine view:

The critics’ real worry, then, is that ESPN, by virtue of its size, could gain an advantage on some other sports content provider who chose not to offer a similar uncapped service. But is this government’s role – the micromanagement of prices, products, the structure of markets, and relationships among competitive and cooperative firms?

Read the rest of this entry →

by danps

ODNR meets with public on Nelson wells

2:48 am in Uncategorized by danps

Against fracking 01

Against Fracking

Cross posted from Pruning Shears.

Last summer the Ohio Department of Natural Resources (ODNR) announced plans to approve seven toxic fracking waste injection wells for a single site in our county. Many citizens were alarmed by this, and at the time I posted on some of our fruitless attempts to get ODNR (in the person of geologist Tom Tomastik) to have a public hearing during the comment period. Instead we were promised an informational meeting at some point.

ODNR finally held it this last Thursday – nine months later, and about a 50 minute drive from the community where the wells will be permitted. Department officials assured residents that they really tried to find a good place:

Mark Bruce of ODNR’s Office of Communications, said the state tries to make such information sessions “as convenient as possible.” He said Wingfoot Lake State Park was the closest state facility with adequate meeting space.

The meeting really should have been held in the impacted community. Even if some technicality in the bowels of the Ohio Revised Code might justify having it so far away, it really is not in the spirit of public service to require citizens concerned about a major event in their town to travel far outside it to attend a meeting. (It also raises the question of who the rules are written to serve.)

In addition, ODNR does not appear to know our area very well. In last summer’s post I noted how they printed their public notice on the Soinski wells in the largely unknown Portage County Legal News rather than the county’s largest daily newspaper, the Record Courier. We are a friendly people here in Portage county; if ODNR had trouble locating a suitable facility in Nelson we would have been happy to help find one.

The department also made it clear that those who did make the trek would not be welcome:

ODNR is also stressing that crowd size and activities will be strictly controlled.

The release notes that only small personal items and purses will be allowed in the lodge, that all bags may be subject to inspection by law enforcement, and that no video cameras, demonstrations, signs or banners will be allowed inside. The fire marshal’s room occupancy limit will be enforced.

Because nothing says “transparent and citizen-friendly public office” like strict control of residents and not allowing them to take pictures at a public meeting. Also, the “no signs or banners” verbiage looks like a response to the informational meeting held in Athens last November. Citizens there objected to the format when it was announced:

Critics of injection wells have argued that the open house format, in which various informational booths are made available to the public, is inferior to the public hearing format, in which citizens can stand up and voice their opinions to state officials and the rest of the crowd in attendance. (ODNR still takes written comments even under the open house approach, however.)

In a news release, the Athens County Fracking Action Network and Appalachia Resist!, two groups opposed to hydraulic fracturing for oil and gas, and to new injection wells to store the wastewater from such operations, slammed ODNR for not holding a genuine public hearing.

“An ‘open house’ is no substitute for a public hearing,” the release maintains. “At a public hearing, residents bring their concerns publicly before ODNR and all assembled, speaking one at a time in an organized fashion so that every comment can be heard by all. Most importantly, at a public hearing, public comments are entered into the legal record and can thus help hold ODNR accountable to the public.”

By contrast, the release alleges, at an open house citizens “are asked to mill around a large room, talking to various ODNR representatives in a casual one-on-one manner,” and comments don’t become part of legal record, “so ODNR cannot be held accountable to objections raised.”

When the event was held, people showed up with signs and yelled, which sounds awful. But consider: State Republicans are vocally in favor of fracking. Democrats – with a handful of exceptions – use a rhetoric of strategic ambiguity. The regulatory agency is, well, you’re reading about it now. The industry is flush with cash and can air as many “natural gas: America’s clean energy future!” commercials as it wants. When all you’ve got is your voice, you’ll use it as best you can.

So ODNR responded by making the information sessions even less useful by banning anything that might register or document strong opposition.

Our session began, as the one in Athens did, with a set of tables in the back that had ODNR officials on hand to talk, and some placards next to the tables. They had titles like “Seismic networks. Monitoring seismic activity across Ohio,” “Proposed class II injection wells (Portage) in relation to existing Ohio wells,” “Class II injection well surface facility. Components and checklist,” and other generalities.

One of the tables did look relevant, with a groundwater yield map in relation to proposed injection wells. But without the ability to sit down and study it, check it against other resources, maybe consult local experts, and so on, we couldn’t really do much more than look at it.

What we really wanted was to have our questions addressed, and one of the strongest impressions from the meeting was citizens trying to get answers and being turned away. The audio clips below are some of the exchanges between ordinary Ohioans and ODNR officials. Except for the county commissioner at the end the cast of characters is just regular citizens.

The first two clips have a lot of background noise and are hard to hear – we don’t have high end equipment and typically bring along our own humble devices or what we can borrow from someone else. But citizens can clearly be heard asking about the Soinski wells and being assured that they will be discussed in detail during the presentation (transcript).

Also listen to how the clip ends – with officials trying to stop the audio recording. This, along with the ban on video recording, may have been a violation of Ohio’s Sunshine Laws. The manual states (p. 89):

A public body cannot prohibit the public from audio or video recording a public meeting. A public body may, however, establish reasonable rules regulating the use of recording equipment, such as requiring equipment to be silent, unobtrusive, self-contained, and self-powered to limit interference with the ability of others to hear, see, and participate in the meeting.

Read the rest of this entry →

by danps

All Those Partnerships With Business Might Not Be So Great

2:53 am in Uncategorized by danps

No Associated Press content was harmed in the writing of this post

On last Sunday’s "Meet the Press" Michigan governor Jennifer Granholm discussed the economy, and did so with an unmistakable emphasis:

smartly, strategically, surgically intervening to invest with the private sector
[snip]
smartly intervening with the private sector to be able to do the breakthrough technologies that the private sector doesn’t have the funds to be able to do
[snip]
the government has to partner with the private sector to create jobs
[snip]
we have 16 companies now in Michigan just in the past year because we partnered with the private sector

And with perhaps unintended accuracy:

Strategic investment with the private sector is what works in the 20th century.

That one of the more prominent Democratic officeholders in the nation took such pains to emphasize the need to partner with the private sector is very revealing. It goes way beyond, say, offering tax breaks to encourage outcomes that policymakers favor. In many cases (Granholm’s illustration included) it means providing glorified bribes to get entrenched industries to ostensibly support goals it is openly hostile to. If government is going to get involved so directly, wouldn’t it make more sense to identify promising new actors that have embraced those breakthrough technologies – and help them get across the valley of death?

Her comments are of a piece with the larger belief that government needs to have a warm and fuzzy relationship with large corporations. The reasoning for it usually goes something like this: If we cozy up to them and find out what they really want, they will be extra productive. They in turn will hire lots of new people, pay higher wages and return handsome profits to shareholders.

There never seems to be any consideration for what happens if instead they lay off people due to the productivity gains, drive their existing workforce harder, perhaps even endangering them, and funnel the profits into executive compensation. In a way it compares to trickle down economics: In both cases those at the lower end of the economic scale are supposed to be beneficiaries, and in both cases that end is achieved by showering the privileged with largesse and assuming they will share it.

The eager-to-please attitude extends to the Food and Drug Administration (FDA), where its site proudly proclaims it "is interested in partnering with the stakeholders to further its public health mission." The latest revelations about the egg recall are just additional confirmation that the agency subordinates regulation to happy relations with an industry it is supposed to be monitoring.

These problems are not new, either. Perhaps the most egregious recent example came several years ago when then-Deputy Commissioner Lester Crawford testified: "Referring to the industry as a client or as a customer is sort of part of the new emphasis on stakeholder involvement." Crawford then went on to a brief but revealing stint as FDA head. The conflicts and perverse incentives that characterized his tenure can be seen at state and local levels too, with similarly unpleasant results.

There is sometimes a sinister aspect to these kinds of "collaborations." Even before 9/11 the government leaned on telecommunication companies to assist them in spying on citizens. Telecoms are free to hand their data over to the government – and the government does not need a search warrant. Clearly it is much more convenient for a private company to hand all its records over than to go in front of a judge and argue for the right to get a single individual’s data.

Now that it is clear that there will be retaliation if they do not play ball, phone companies are downright eager to provide authorities with terribly useful tools for digging in to people’s lives. The courts have pushed back in some cases, but the White House is aggressively moving to widen the pipeline of information flowing to the federal government. The continuity with the previous administration is unmistakable, and it suggests one of those dynamics that is not so much Democrat versus Republican but establishment versus outsider. After all, it makes life easier for everyone inside the Beltway if the lobbyists, regulators and politicians all get along splendidly.

Government should not have any kind of official position towards the private sector, and it certainly should not have the kind of solicitous stance it has so energetically cultivated in recent years. It should simply set up the rules, expect them to be followed, and regulate with all appropriate energy. Its stance should by default be neutral; for businesses and industries with a pattern of bad behavior it should become increasingly antagonistic. The risks of the friendlier approach are all too plain.

by danps

Getting Beyond Regulation

2:49 am in Uncategorized by danps

No Associated Press content was harmed in the writing of this post

The theory on how to best protect the public from private sector wrongdoing consists basically of regulation. From the Federal Reserve Act nearly a century ago to the Securities and Exchange Commission (SEC) during the Depression to the Environmental Protection Agency (EPA) in 1970, we have largely trusted that a federal authority could effectively monitor, and if necessary punish, businesses.

Regulation’s limitations became too obvious to deny during the Bush years. The EPA, not exactly a pit bull to begin with, became almost totally, laughably ineffective (via). To be fair, environmental protection has been derided by conservatives as business unfriendly, myopic, job killing do-gooderism run amok for decades. It is not surprising that the agency had trouble getting the widespread support needed to sustain real vigilance. Also, compared to some of its sister agencies the EPA was a paragon of rectitude.

Even under the best circumstances regulation is destined to be under perpetual assault from those who would benefit from its absence. If you look, for instance, at the way Goldman Sachs Group Inc. (which incidentally is an anagram for "a cad churning smog slop") installed a revolving door between its boardroom and Washington, it becomes unsurprising that regulation of it has ceased (here is this week’s scandal).

The neutering of regulatory bodies may paradoxically cause those in them to have a positively exalted view of themselves. For example, here is Simon Johnson’s mild take on Goldman’s latest: "If the Federal Reserve were an effective supervisor, it would have the political will sufficient to determine that Goldman Sachs has not been acting in accordance with its banking license. But any meaningful action from this direction seems unlikely." Contrast that with Minneapolis Fed President Narayana R. Kocherlakota’s almost messianic view of the Fed:

My theme here is that this improvement in our economic situation is attributable in large part to actions taken by the Federal Reserve. I will emphasize that the Federal Reserve was only able to undertake these actions because of the expertise and information it had acquired as a supervisor of the nation’s banks. My conclusion is that stripping the Federal Reserve of its supervisory role would needlessly put a Great Depression on the menu of possibilities for our country.

(He appears, by the way, to be another inflation crusader. Look at the last two paragraphs of page six for a truly bizarre scenario on the dangers of inflation. I particularly like the line "Suppose that households believe prices will rise.")

In short, regulation has a spotty track record lately. Economist Barry Ritholtz acknowledged that and pointed to a new approach when he wrote a recent proposal "would not have prevented this crisis, but it would reduce taxpayer exposure to Wall Street speculation." Since regulation depends on human intervention, it would be good to have a simple mechanism that reduced the public’s exposure to abuse.

Think about the surprisingly durable support for a public health insurance option. It bypasses regulation completely. It says to the industry: do what you want, charge what you want, chart your own course – we will not interfere; we’ll just be over here with our own operation that folks can pick if they want. Those who wish to reduce their exposure to the wonders of laissez faire capitalism can sign up. The rest can go with you. What rugged individualist could possibly object? (The main objection to it – that it would undercut the private sector and drive it out of business – raises the obvious question: then what value is the industry providing?)

Similarly, Brent Budowsky recently called for a "public option bank" that would offer a small menu of simple, ordinary services for those who prefer not to take their chances with Citibank or Bank of America. It would not impact the private sector in the slightest – no new taxes, regulations or hoops to jump through. It would just provide an alternative to those who wanted reduced exposure. Those with a taste for swashbuckling capitalism can throw in with Wall Street, those who prefer less excitement can have it.

The "quarantined risk" model will not work for everything. You cannot very well have a government protected patch of the environment and let industry turn the rest into a Superfund site, for example. It does mark the emergence of a new possibility, though, and one that would be an excellent hedge against failed regulation. If it keeps getting traction look for even its most innocuous expressions to be ferociously opposed, because it will represent not just a change in policy or political alignment, but a change in the way we think.

by danps

Regulation and the Depository Trust Clearing Corporation

2:16 am in Uncategorized by danps

No Associated Press content was harmed in the writing of this post

On Wednesday lambert pointed me to a Bloomberg article by Robert Schmidt and Jesse Westbrook claiming the Obama administration will call for moving some of the powers of the Securities and Exchange Commission (SEC) to the Federal Reserve. While the SEC has come under fire for its reluctance to aggressively monitor Wall Street, the solution (as lambert points out) is to give the agency the resources, incentive and mission to do so, not to transfer authority elsewhere. Schmidt and Westbrook note that it "still has powerful supporters, including a number of Democrats on the Senate Banking Committee who aren’t likely to support having an agency they oversee cut back," so maybe this is just a trial balloon. Either way it doesn’t deserve to make it past the rumor phase.

Whenever the news turns to the world of financial services, though, it seems like the path grows dark very quickly. (If so, that probably is by design.) I read stories like this and think, Congress oversees the SEC which is as it should be – and the SEC should be regulating…what? One of the most Read the rest of this entry →