Baker Hughes clues in, reveals formerly secret frack chemicals
<p>Fracking chemicals have been protected as trade secrets...but secrets look dirty. Here's how to disclose chemicals without losing business advantages.</p>
In the highly polarized debate over fracking, the energy industry's failure to fully disclose chemicals it uses for fracking has fed public fears about water contamination, transportation risks and other hazards. The industry has come a long way in lifting the veil of secrecy that has surrounded the chemicals. But trade secrecy claims hide chemical identities and fuel controversy over public disclosure.
Trade secrecy issue has evolved, and recent proposals to change how chemicals are reported may lead to substantially increased disclosure beyond current levels.
A look at fracking's secretive history
The move towards true full disclosure with few or no trade secrecy claims is far removed from the very broad claims of trade secrecy for all chemicals that accompanied the sharp escalation of fracking activities and water contamination incidents in Pennsylvania's Marcellus Shale in 2009.
Beginning in 2010, Range Resources pioneered public disclosure of its frack fluids, by placing well-by-well chemical disclosures on its corporate web site.
Shortly thereafter, Southwestern Energy and the Environmental Defense Fund co-drafted model state chemical disclosure legislation. Texas State Representative Jim Keffer introduced the bill and it drew early support from five other oil and gas companies. The bill was weakened in the legislative process before it was signed into law in 2011. Environmental groups such as the Environmental Defense Fund and Sierra Club hailed the final product as a "landmark," but withheld support.
The new law nevertheless represented substantial disclosure progress. The fight then moved to other states, with companies' ability to claim trade secret protections and the public's ability to challenge such claims a core element of legislative debates. As of late 2013, over 20 states had adopted some level of disclosure requirements.
Parallel with these legislative developments, state regulators and the oil and gas industry collaboratively created a voluntary chemical disclosure site, fracfocus.org, as a repository for well by well disclosures of chemical use. Scores of companies stepped up to disclose their information on FracFocus, and most state legislation provided for disclosure on the site. Despite the flood of increased information, the first version of FracFocus, FracFocus 1.0, was criticized because it didn't offer a database format to easily analyze data in any way other than on a single well-by-well basis. So FracFocus 1.0 could not be readily used to assess individual companies' efforts to eliminate specific chemicals or reduce overall toxicity or volumes of chemicals. FracFocus imposed no independent limits on companies' trade secret claims.
Highlighting the trade secrecy concern, environmentalists filed a lawsuit in Wyoming in 2012 challenging trade secrecy exemptions granted under Wyoming law. In 2013, FracFocus 2.0 was unveiled, transformed into a database system with increased search functionality. Further signaling concern about trade secrecy claims, in November U.S. Secretary of Energy Ernest Moniz asked his shale energy advisory board to create a task force to evaluate FracFocus 2.0. The task force's February draft report (PDF) noted that between June and December, trade secrecy claims were made for 16 percent of the entries in the FracFocus database.
The task force recommended a simple change in reporting practices that would lower industry fears about disclosure of trade secrets. For the most part, but with some exceptions, companies have been reporting the chemical products they use together with the chemicals specifically associated with those products. They have claimed trade secrecy for some of those chemicals out of concern disclosure would allow competitors to learn their proprietary product-specific formulas.
To overcome this problem the DOE panel recommended an alternative "systems approach" to reporting, where the chemical products and the chemicals would be reported separately, so the chemicals wouldn't be clearly associated with specific products. This change was seen as allowing for full or nearly full disclosure without compromising proprietary competitive advantages.
Voluntary disclosure always looks better
Shortly following the advisory panel report, Baker Hughes, one of the largest players in the frack fluid market in the U.S., made public a similar proposal it had been developing. In a website posting, Baker Hughes said it "believes it is possible to disclose 100 percent of the chemical ingredients in hydraulic fracturing fluids without compromising our formulations — a balance that increases public trust while encouraging commercial innovation." It said its new reporting approach would provide complete lists both for products and chemical ingredients used; the products would be listed in one part of the reporting form and the individual chemical ingredients would be listed separately below.
Baker Hughes has been a leader among fracking contractors in promoting safer fracking chemistries and in reporting on its progress, as detailed in September 2012's The Right Chemistry blog. The company describes the system it has developed for assessing (PDF) and ranking the toxicity of its products in professional papers. It recites the specific steps it has taken to reduce the toxicity of its fluid components in another set of professional papers. Customers can use Baker Hughes' toxicity ranking system for chemicals to ask the company to supply reduced-toxicity alternatives, as a Canadian energy company has done for a well it proposed to drill (PDF).
Halliburton, another dominant player in the frack fluid market, which also has been developing "greener" frack fluid systems, is much less sanguine about the systems approach than Baker Hughes. In comments (PDF) on the task force report, Halliburton took "strong exception to the assertion that the risk of disclosing proprietary information is 'very low' if the 'systems approach' to disclosure is used." It also criticized the task force for exaggerating the extent and significance of trade secret claims. Halliburton says that many of the 16 percent of chemicals for which trade secrecy was claimed in FracFocus are not hazardous as defined by federal law applicable to occupational hazards, or else are present in only very small quantities.
Apache Corporation is aligned with Baker Hughes in believing that trade secrecy claims can be eliminated. The company states on its website that it is moving towards a new chemical sourcing model "which will eliminate the confidential business claims from vendors and will ensure Apache is aware of all chemical components being used in its operations."
The DOE advisory panel report, Baker Hughes' announcement and Apache's position have given a major boost to true full disclosure of fracking chemicals. Companies seeking to build public confidence in their operations should add their supporting voices.
Test tubes image by Andrey Armyagov via Shutterstock.