In the second part of our special blog series on water, Julian Claudi asks – is it necessary to privatize water, what are the different approaches around the world and what has happened in instances where a private corporation has indeed got its hands on the neighborhood pump or the household tap?

To pick a prominent example of the kind of passions and conflicts water privatization can unleash, let’s go back to the year 2000 – to Bolivia. There, the Andean city of Cochamaba erupted in protest after a private, foreign-led consortium took over the city’s water system. The previous year, in September 1999, the Bolivian government privatized the water supply in Cochamaba and allocated the rights to Aquas del Tunari, an affiliated company of Bechtel Corporation (Bechtel Group) which is ranked as the fifth-largest privately owned company in the US.

It must be said that Cochabamba suffered from a chronic water shortage. Most of the poorest neighborhoods were not hooked up to the network, so state subsidies to the water utility went mainly to industries and middle-class neighborhoods. In the World Bank’s view, it was a city that was crying out for water privatization.In a nutshell, the World Bank threatened to freeze credit to Bolivia if it did not privatize water.

But the consequences for the people were drastic – Aquas del Tunari raised the water rates many times over, which led to a national uprising. As a result, the Bolivian government backtracked and disbanded the contract with the company. In turn, Bechtel tried to sue Bolivia for over $50 million in compensation. Battered by several years of bad publicity, Bechtel finally settled the $50 million lawsuit for a symbolic amount of about 30 cents on January 19, 2006.

To get a glimpse of what happened in Bolivia in 2000, it’s worth watching “Abuela Grillo,“ an animated short film by a group of Bolivian artists which is based on the events in Cochamaba as well as on a myth from the Bolivian lowlands and deals in a metaphorical way with the issue:

Abuela Grillo from Denis Chapon on Vimeo.

The European Union may be far away from such a scenario nowadays, but there are already over one million Europeans who have signed the citizen’s initiative “Water is a human right“. Their biggest worry is that the EU will privatize European waterworks in the mid-term and through the back door.

The reason for the concerns are a much quoted proposal from the EU Commission to change a concessions directive to bring more market competition between public and private water suppliers “to ensure that EU companies have access to business opportunities and that public authorities get the best value for money.”

At the same time, the Commission insisted repeatedly in several press releases earlier this year that “the proposed directive will therefore not lead, under any circumstances, to imposed privatization of water services.”  So will that really be the case? Not exactly, according to the non-profit foundation and campaign group Corporate Europe Observatory (CEO). It says the planned directive on concessions of the EU commission could have unforeseen consequences.

“Municipalities who have some form of private participation in their water supply, even a small part, would have to offer their water contracts for EU-wide bidding. This would give private water multinationals like Suez and Veolia new opportunities to expand,” the group says.

At the end of June this year, the EU Commission then unexpectedly said it would reconsider its position in light of “the concerns expressed by so many citizens.”

It’s probably not the last word in the public discussion about water privatization in the European context. Meanwhile, in many places around the world, water privatization is already a hot button issue with various models and strategies being discussed, practiced and fought against.

Advocates of privatization have many arguments. A common one is that “private entrepreneurs are more efficient in increasing access to clean drinking water and have more technological skills and more assets for investment.”

Another is that privatization is the right thing in general if “a government that is strong enough to uphold regulations and to force the private company to do a good job.”

Meanwhile, opponents have their own list of convincing points – mainly that the environmental price for privatization is simply too high. “Privatization has been accompanied by the degradation of water quality, increase in water loss, deterioration of infrastructure and increase in prices,” according to some.

There are yet other, more moderate voices that suggest that say that water must have a certain price to avoid ongoing water scarcity in many places. The Irish think tank, Institute of International and European Affairs (IIEA), for instance, comes to the conclusion that “water pricing” is an option which must be considered:

Another school of thought sees a constructive solution in re-municipalization – that means putting the water supply back in public hands. That’s what happened in Paris and Argentina:

A project from Greece called “Initiative 136” takes a different tack. It’s an attempt at a third way by avoiding both water privatization as well as public-private-partnerships.

“The idea is that if every water user bought a non-transferable share, ‘the public could own the water company through a system of neighbourhood co-operatives of water users coming together through a single overall co-operative.’136 euros is the figure you get from dividing the 60 million euros for which the company is to be put on the stock market by the number of water meters in the city.”

At the time, activists from the citizen campaign “Human Right to Water” are going in the same direction but aiming at high level EU institutions directly. “We are taking up the challenge to get implementation of the human right to water and sanitation’ on the European political agenda,” they say.

Meanwhile in Bolivia, residents of Cochabamba’s southern zones “frustrated with both the private and public water management models,[…] are increasingly relying on traditional community-run water systems as an alternative.”

There are a host of players involved in the water privatization debate – public state supply advocates, private companies, public-private-partnerships and cooperative citizen shareholder movements. They all have their own concepts about how access to water can be best ensured. In the best case, the different ideas will merge into a sustainable and resilient supply system and contribute to a fair and free global right to water distribution for everyone.

Surely this goal is only achievable under the premise of a local and global framework of sustainability and participation and not with an overarching focus on profit.

 

Following the international premiere of “Promised Land” at the packed Berlinale film festival press conference in Berlin last week, actor Matt Damon said the movie, directed by Gus van Sant which deals with fracking,  is a film about American identity but at the same time a global issue.

The film’s international premiere was accompanied by news agencies announcing that Russian gas company and  exporter Gazprom plans to cut gas prices for European customers in the billions in 2013. According to several experts, this maneuver could be linked, besides strong competition in the liquefied gas export sector, directly to sinking gas prices: the fracking boom in the US is believed to have already lowered international gas prices even though the US is not exporting gas (yet!) to Europe.

It’s yet another example of the so-called US shale gas revolution that’s already transforming the political global power structure. And it looks like fracking will likely increase globally for geostrategic, power and profit reasons in the next years.

“Promised Land” takes place exactly against this backdrop. It takes an in-depth look at how the industry operates  and shows the possible consequences by using an intelligent and precise analogy of a psychological war happening in the US in areas with huge underground gas reservoirs. It focuses on how a nine-billion-dollar corporation tries to get its hand on much-needed land, how they operate psychologically and what alternatives citizens are left with. The film shows how the corporate salesman Steve Buttler (Matt Damon) and his colleague Sue Thomason (Francis McDormand) work hard to buy the village community with some entertaining and clever twists and turns of the plot.

The main aim of the film obviously is to raise awareness among people and to get them to think deeply about the dynamics and consequences of fracking. Matt Damon said after the premiere that if you are searching for more in-depth information about the fracking process you should research online. It would be simply impossible to lay out all the pros and cons of fracking in one feature film but it’s still packed with information.

The movie avoids black and white clichés, but it’s pretty clear that the makers of the film care about the “small people” and how big corporations are trying to manipulate them with scare tactics and playing on existential fears – circumstances which have heightened in the last decades through an unsustainable neoliberal capitalistic system.  It is pretty clear that the corporation in the movie is a child of that system and that the same unregulated system produced and created in many ways the situation the village’s residents are in right now: earning less money, living in constant fear of losing their jobs, drowning in debt, not being able to give their children a decent education, not knowing if they can die with dignity.

The film addresses all these issues but it hasn’t been too successful in the US. It remains to be seen how it will fare at the international box office and what impact it will have on the ongoing fracking debate.

We’re ending our blog series about the hydraulic fracturing method with a selective overview about particular occurrences connected with fracking which may lead you deeper into the layers of the fracking process.

# The movie “Gasland” by director Josh Fox in 2010, has become a popular basis for discussions about fracking. The director and activist set a milestone with his work, raising some key questions that marked the public discussion in the US. Perhaps we can mention two specific incidents to underline the far-reaching impact of his work.

#  The Independent Petroleum Association of America felt obliged to send a detailed public letter to the Oscar Academy of Motion Picture Arts and Sciences in February 2011. It was a reaction to the Oscar nomination for “Gasland.” The eight-page paper which contradicts every single theory in the film about the harm and damage resulting from fracking ends laconically with the words: “Anything we miss? Guess we’ll be seeing you at the movies. Maybe not this one, though.”

# The IPAA financed a documentary which has been available on the internet since June 2012 and which contradicts every premise of Gasland, it’s called Truthland.

# At the beginning of 2012, the New York Times gathered and published with a short statement hundreds of leaked intern industry e-mails, which showed the majority were sceptical about the fracking boom: “Over the past six months, The New York Times reviewed thousands of pages of documents related to shale gas, including hundreds of industry e-mails, internal agency documents and reports by analysts. A selection of these documents is included here; names and identifying information have been redacted to protect the confidentiality of sources, many of whom were not authorized by their employers to communicate with The Times.”

# Environmental activist Erin Brokovich called fracking not specifically “longterm solution-driven” in a TV interview  in August 2012 as she gathered a ton of e-mails from anxious US citizens living in areas which might be affected by fracking and as she claimed: “Let’s stop the bullshit and get down to finding some solutions to our problems.”

# Recently “Promised Land,” the first Hollywood fiction film about fracking was released in US cinemas and led to a huge discussion even before it was shown to the public. “The energy industry is worried that it will be presented in a critical light and is preparing possible responses, such as providing film reviewers with scientific studies, distributing leaflets to moviegoers and launching a ‘truth squad’ initiative on Twitter and Facebook,” the Journal said.

Additionally, here are some international events connected with fracking which one might not necessarily have expected.
# Speculations say Russian oil company Gazprom is interested in seeing an European fracking ban. “Some predict what was once unthinkable: that the U.S. won’t need to import natural gas in the near future, and that Russia could be the big loser.”

# It is said that  Exxon Mobil thanks to fracking became fond of Siberia:

“According to reports, the Russian government is placing its hopes on Exxon Mobil to help it unlock oil trapped in the Bazhenov shale formation in Western Siberia. Estimates say that the block could 13 billion barrels of oil and Rosneft and Exxon are targeting old fields in the region that no longer produce oil.”

# Several Indian farmers supposedly “profit” from the Fracking Boom:

“US companies drilling for oil and gas in shale formations have developed a voracious appetite for the powder-like gum made from the seeds of guar, or cluster bean, and the boom in their business has created a bonanza for thousands of small-scale farmers in India who produce 80 percent of the world’s beans.”

# Famous artists such as Yoko Ono, Sean Lennon and Susan Sarandon are campaigning against fracking. They are touring together through different US states to discuss the issue.

# Fracking finally has also entered  popular fiction: Comics, romance novels and Grisham-esque thrillers are already dealing with it.

It’s fair to say that fracking is unlikely to disappear in the upcoming years in the global energy supply discussion. Whether you want to get deeper into the subject, campaign against it or are simply interested in the economic outcome, we hope the blog gave you a good overview of the subject.

 

At the start, several economists, environmentalists and non-profit organizations considered fracking to be a solid bridge technology on the way to a completely renewable energy supply.

“This is a real opportunity for your industry – this is not a ‘bridge to nowhere’ that we are talking about.  Natural gas provides a bridge to the future.  To the extent that you can deliver gas at a reasonable cost, you can be part of the solution to climate change.”

That statment from Eileen Claussen, president of the Center for Climate and Energy Solutions (C2ES), came from her controversial speech in 2008.

But now, fracking, or hydraulic fracturing, has come under fire from all sides. In fact, they believe it’s a counter-productive bridge to nowhere.

Oil and gas are becoming cheaper and competitive again due to fracking. That has in turn put the transition from fossil fuels to renewables in danger.

So what is the solution? Is there any way to reconcile the two driving factors, economic profit and ecologic sustainable development?

Or is there simply not enough research into the pros and cons of fracking yet?

Yale University posed that question to a panel of experts last September:

The opinions diverge, to say the least. If you are still new to the subject, get a short overview in the upcoming 5th and last part of the Global Ideas Fracking Blog series.

 

Natural gas development through hydraulic fracturing stands for job creation, energy security and has a long and clear record of safety. At least that’s what Bruce Vincent, president of the US-based oil and gas company Swift Energy and former IPAA chairman, says. If someone like Bruce Vincent makes statements like this, it adds authority to the subject: The IPAA is the American oil and gas association and it’s very influential. According to Bruce Vincent, the gas industry simply needs to educate people better about the facts:

The role fracking will play in creating jobs in the future appears to be a little less promising if we listen to Michael Feroli, Chef U.S. Economist at JPMorgan Chase & Co. (JPM):

“It is definitely a positive for the economy, but one can overstate how much of a positive. Oil and gas production account for about 1 percent of gross domestic products, and will have a limited impact on the country’s unemployment.”

At least fracking might be the cleanest way of burning fossil fuel – but then why is analyst Sue Tierney, energy consultant at Analysis Group, publicly worrying about irreversible changes within the ecosystem in the nearby future:

“Fifty years from now, are we really going to be wondering if we really screwed up because we went on this big gas boom? You really wouldn’t want to be messing that up.”

The american investigative journalist Jeff Goodell has his own response to that question:

“It’s not only toxic – it’s driven by a right-wing billionaire who profits more from flipping land than drilling for gas.”

In a detailed article in the Rolling Stone magazine in the March 2012 issue, he claims that

“Fracking, it turns out, is about producing cheap energy the same way the mortgage crisis was about helping realize the dreams of middle-class homeowners.”

His profound research, which is focused mainly on the business of the gas U.S. company Chesapeake Energy, raises – if it should turn out to be justifiable – a lot of questions about the main motives behind fracking:

“For Chesapeake, the primary profit in fracking comes not from selling the gas itself, but from buying and flipping the land that contains the gas. The company is now the largest leaseholder in the United States, owning the drilling rights to some 15 million acres – an area more than twice the size of Maryland. McClendon has financed this land grab with junk bonds and complex partnerships and future production deals, creating a highly leveraged, deeply indebted company that has more in common with Enron than ExxonMobil.”

Jeff Goodell‘s opinion about the CEO of Cheasepeake Energy is clear:

“Like generations of energy kingpins before him, it would seem, McClendon’s primary goal is not to solve America’s energy problems, but to build a pipeline directly from your wallet into his.”

But even if we put these claims aside for the time being, tthe doubts about fracking and its effects on the environment are just as serious. Let’s have a look at it.

There are allegedly 65 chemicals that could be components of the fracking fluids used by shale gas drillers: Benzene, glycol-ethers, toluene, 2-(2-methoxyethoxy) ethanol, and nonylphenols. All of those chemicals have been linked to health disorders if human exposure is too high.

Therefore, contaminated groundwater is one of the main issues that has raised safety concerns.

Also, the subject of flowback, meaning the waste of water, has been much discussed.

Dr. Anthony Ingraffea, D. C. Baum Professor of Engineering at the American Cornell University, has researched fracture mechanics for more than 30 years and stresses that drilling and hydraulic fracturing

“can liberate biogenic natural gas into a fresh water aquifer.”

Fresh-water Aquifers that provide sustainable groundwater some 100 meters under the earth surface to urban areas and for agricultural irrigation are critically important in human habitation and agriculture. Many villages and even large cities draw their water supply from wells in aquifers.

Read more about it and why fracking is under suspicion to cause a global water crisis in the compact booklet of the American NGO Food and Water Watch.

Earthquakes like the one that happened in the UK in 2011 could be a direct consequence of the underground explosions from the hydraulic fracturing process. Cuadrilla Resources, the UK company who has been associated with the earthquake stated in a press release:

“The hydraulic fracturing of Cuadrilla’s Preese Hall-1 well did trigger a number of minor seismic events. The seismic events were due to an unusual combination of geology at the well site coupled with the pressure exerted by water injection as part of operations.”

Additionally, there is the claim that methane air emissions caused by the hydraulic fracturing process are very high and that they could offset alleged climate benefits of unconventional gas production.

The independent research and non-profit organization “Center for Research of Globalization”, based in Montreal, published an online article in May 2012 that claims the following:

“During the uproar over the BP Deepwater Horizon Gulf of Mexico oil spill, the Obama Administration and the Energy Department formed an advisory commission on Shale Gas. Their report was released in November 2011. It was what could only be called a “whitewash” of the dangers of shale gas.”

John Deutch, Chairman of the subcommittee who acquired the so-called Deutch report in spite of it all called shale gas

”the best piece of news about energy in the last 50 years.”

Undeterred proclamations like these go up against the recurring concerns that have come up in public discussion. Read 4^th further in this blog series to find out more about fracking, and how it’s discussed as a clean bridge technology to a clean future.