Fools’ gold

Last week, following news of a 30-percent drop in SUV purchases in May versus the previous year, GM CEO Rick Wagoner announced that his company would close four truck and SUV plants by 2010 and make a drastic shift to more fuel-efficient cars. Meanwhile, highly fuel-efficient Hondas and Toyotas are reportedly flying out of the dealerships.

Duh. It only took Wagoner about $40 billion in losses to figure that one out. To the enviro-nuts among us, it’s been clear for years that the higher fuel efficiency standards rejected for the past couple of decades by a cravenly business-pandering Congress would not only have helped achieve American energy self sufficiency, but would eventually have helped to sell vehicles—and save jobs. If the fuel efficiency of the American fleet had kept up with that of the rest of the world, maybe it could have been GMs and Fords flying out of the dealerships.

The GM case is interesting because it challenges our preconceptions about regulations. Especially since the Reagan years, the conventional wisdom has been that regulations are bad because they interfere with business. The only problem is that business left to itself is frequently too focused on short-term profits to see, or act according to, its own long-term interests (let alone those of society). That’s one place where regulations like fuel-efficiency standards can step in and make a positive difference.

We think that regulations can play a similarly positive role in this area, in the face of the current onrush of natural gas drilling. And it’s not just a matter of environmental or human health; it’s a matter of dollars and cents.

The energy corporations are concerned only with their short-term profits. In a few decades, once the wells run dry, they can move out and leave any damage behind. Unfortunately, the resource most at risk of damage is one that, by the end of this century, is going to be a lot more valuable than natural gas: fresh water.

A recent report by Goldman Sachs described water as the “petroleum for the next century,” which will offer huge returns for investors who figure out how to play it. “Demand for water continues to escalate at unsustainable rates… By 2025, it is estimated that about one third of the global population will not have access to adequate drinking water,” the report said.

Our area is particularly blessed with an abundance of fresh water; in fact, in its recent Forests, Water and People assessment, the U.S. forest service found that the Upper Delaware area is one of the highest quality and most important clean water sources in the Northeast. It might seem that the current system of federal regulations, from the Clean Water Act to the Safe Drinking Water Act, ought to be able to protect this fabulous asset. But our recent experience with the natural gas drilling exposes massive flaws in that system.

For one, the Energy Policy Act of 2005 exempts natural gas drillers from many of the regulations designed to assure pure water supplies. A recent decision by the Ninth Circuit Court that drillers are not exempt from the Clean Water Act, while a step in the right direction, affects only runoff and erosion concerns; it does not affect fracking and toxicities introduced into the water table or air.

Moreover, there are no laws that require drillers to disclose and open to public scrutiny the chemicals that they use. And even if the laws were in place, the number of environmental protection agents available to police the industry appears to be grossly inadequate in both New York and Pennsylvania.

It is not at all clear that contract law is sufficient to fill the void left by an overly weak regulatory structure. The associations most property owners have joined are certainly more powerful in negotiating than individuals would be. But even together, they have nothing like the legal and financial heft of the gas drilling companies, who have lawyers on retainer year round to do nothing but fight and delay lawsuits until their opponents run out of money.

The bottom line is that we are playing a very dangerous game, not only with our environment and our health, but with this area’s financial future, if we continue to rush into natural gas drilling without a much more robust regulatory structure being put in place. What an irony it would be if, in our rush to get rich from a reservoir of gas that won’t last more than about 50 years and will be worthless by the end of the century, we destroyed a resource that will remain precious as long as the human race endures.

Dr. Punnybone

Miss Take