If you are an investor, chances are you will look at oil companies whether they are big or small; particular as the price of oil was approaching $100 a barrel for there was plenty of money to be made. Over the past 5 years, one of the approaches the oil industry used is  called fracking and it proved to be successful in extracting more oil and gas from the ground. On the other side because issues tend to have good and bad sides was the fracking sometimes caused water problems, earthquakes, and methane explosions. Most of the time, investors focus on the good side which is using technology to enhance the production of the oil. However, listening or reading about the other side is important. One of the many books about the concerns is called Slick Water by Andrew Nikiforuk published be Greystone Books Vancouver/Berkeley, 2015. The book tells the story of one woman’s struggle against the oil industry and its regulators because in the area where she lived the fracking caused methane to get into the water supply. In Flint, Michigan the water supply has lead which means all the pipes need to be replaced. In rural area or away from cities, most people depend on wells for their drinking water. As long as the oil companies take the oil, pay their royalty the system works reasonably well. When the methane gets into the drinking water the first line of defense is denial that the company caused it.

When you deal with the environment, you deal with many theories because the environment is not static, the earth and weather change. What is the route cause, no one really knows, but it is possible to say some actions have a more direct cause than others. One of the direct cause of methane going in the water supply was fracking. For those who may not know, conventional oil production is to send down a pipe directly into the earth and using pumps bring up the oil. This process does a good job, but there will be oil left; fracking is designed to loosen the earth to collect the rest of the oil. When prices of oil go up, it does a very good job of collecting the rest of the oil. We have seen the use of fracking in North Dakota, Montana, Texas and Pennsylvania where oil is found in shale structures. At the beginning of the oil boom in Pennsylvania – fracking was used but it was very dangerous and not effective. The years have gone by to improve the effectiveness of fracking.

One of the problems with the book is the regulators. As citizens we know regulators have a bias towards the industry because they report to politicians who prefer the industry be productive and have few problems. However, it was disappointing to read as a citizen how tough the regulators made the process. The fight to have clean water in the rural area brings memories of the movie Erin Brockovich movie and the fight against Pacific Gas & Electric.

Linking to dividend paying stocks, no matter what industry you invest in there will be some negative implications as well as many, many positive reasons to invest. There will be industry practices which can be better and when things go wrong how does the company and industry react? and who pays for the damages? As an investor you see a role for government to help pay (or even to pay the bulk of the costs) for in the case of fracking – the water table is not changed every time. There are problems but they change with the different structures below the surface which we can not see until there is perfect information and there is rarely ever perfect information with the earth.

There are more questions than answers, till the next time – to raising questions.