Paper 2

The Halliburton Loophole: Effect of Deficient Ethics in Government


Industrial development and environmental protection have always been at odds with each other. For hundreds of years in the United States, the energy industry- timber, coal, oil, and now natural gas- has been inherently bad for the natural world. In response, Federal and State governments have attempted to mitigate damage while still allowing development. Depending on the politicians in power, the priority has swayed back and forth between economic development and environmental protection. There have been a variety of rationales behind the political decision making, mostly dependent on the desires of lobbyists or voters. However, decisions regarding the well-being of our environment and economy should be based on a stronger rationale than the political persuasions of the time. Environmental ethics can serve as a theory to support environmental policy decisions. Recently, a series of legislative activity has sacrificed a great deal of environmental protection for the sake of industry.  Specifically, the Halliburton Loophole was a law passed by the US Congress based on the personal interests of politicians without any sense of ethical analysis or support.

Energy Policy Act of 2005

In 1997, the US Court of Appeals ordered the Environmental Protection Agency (EPA) to regulate hydraulic fracturing (fracking), an industrial process used by the energy industry to extract natural gas via wells drilled into deep deposits. Three years later, the EPA began studying the potential dangers to water supplies caused by fracking. In 2001, then Vice President Dick Cheney created a task force that recommended to the US Congress that fracking should be exempt from standard regulation. The EPA decided in 2004 that fracking “poses little or no threat” to water supplies (Earthworks 10). The study resulted in the Energy Policy Act of 2005. The Energy Policy Act was created under the pretense of fixing energy policies in the US. The Act intended to create tax incentives and loans for all types of energy production within US borders. The purpose was to create a stronger source of energy that was not imported from foreign supplier and build a more effective energy infrastructure. The act was not completely biased towards fossil fuels; it also provided tax incentives for energy conserving developments in building and authorized subsidies for alternative energy sources (Hines 3). Unfortunately, the most controversial part of the document showed blatant favoritism towards natural gas extraction.

The Loophole

Part of the Energy Policy Act is known as the Halliburton Loophole because it was championed by Dick Cheney, a former executive officer at the Halliburton oilfield services company. The Loophole aspect of the nickname comes from the fact that the Energy Policy Act of 2005 exempted hydraulic fracturing from regulation under the Safe Drinking Water Act and the Clean Water Act. The specific wording of the law follows.

In regard to the Safe Drinking Water Act:

“Paragraph (1) of section 1421(d) of the Safe Drinking Water Act (42 U.S.C. 300h(d)) is amended to read as follows:
‘‘(1) UNDERGROUND INJECTION.—The term ‘underground injection’—
‘‘(A) means the subsurface emplacement of fluids by well injection; and
‘‘(B) EXCLUDES
‘‘(i) the underground injection of natural gas for purposes of storage; and
‘‘(ii) the underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities.’’ (Energy Policy Act 2005)

In regard to the Clean Water Act:

The term “pollutant” means dredged spoil, solid waste, incinerator residue, sewage, garbage, sewage sludge, munitions, chemical wastes, biological materials, radioactive materials, heat, wrecked or discarded equipment, rock, sand, cellar dirt and industrial, municipal, and agricultural waste discharged into water. This TERM DOES NOT MEAN (A) “sewage from vessels” within the meaning of section 312 of this Act; or (B) water, gas, or other material which is injected into a well to facilitate production of oil or gas, or water derived in association with oil or gas production and disposed of in a well, if the well used either to facilitate production or for disposal purposes is approved by authority of the State in which the well is located, and if such State determines that such injection or disposal will not result in the degradation of ground or surface water resources (Energy Policy Act 2005).

In summary, the Energy Policy Act exempts all fluids used in fracking from SWDA regulation, changes the meaning of pollutant in the CWA to not include any material injected into or returned from a natural gas well, as well as exempting the oil and gas industry from reporting toxic chemicals to the EPA Toxic Release Inventory.

The Safe Drinking Water Act

The Safe Drinking Water Act, passed in 1974, protects public health by ensuring safe drinking water via regulations from the Environmental Protection Agency (EPA). The EPA has standards for “90 chemical, microbiological, radiological, and physical contaminants” that could possibly be found in drinking water. Contaminants are regulated based on how often they are found in the environment and how they could affect people.  The EPA then establishes the maximum amount of the contaminant that is acceptable to have in drinking water or creates a required treatment process. It is not always technologically feasible to meet the requirements, so maximum levels are adjusted to be as good as possible within the realm of current treatment capabilities. In 1996, an amendment required the EPA to review the list of contaminants known or anticipated to be in public water and propose future recommendations to monitor the new threats (US EPA 2004).The entire purpose of the SWDA is to prevent negative health effects caused by public water. The Halliburton loophole exempts all chemicals and potential contaminants from the Act that would otherwise be subject to stringent regulation.

The Clean Water Act

The purpose of the Clean Water Act, signed in 1972, is to regulate sources of pollution in naturally occurring water. Limitations to contaminants were based on the best technology available (US EPA 2010). There are two types of pollution regulated by the CWA: point and non-point source. Point source is pollution that comes from a clearly identifiable source. Non-point source pollution has ambiguous or multiple sources, such as runoff from streets. Point sources have specific effluent limitations. A person cannot discharge any pollutant without a permit issued from the state. Each permitted source must provide a monthly report on discharges, which are made available to the public.  By making the records public, consumer and social pressures can force industries and businesses to perform to appropriate standards. Industrial sources of pollution, which the category natural gas wells would fall under, must meet effluent limits but are able to choose the means to reach legal limits. This creates technological pressures; industrial companies will have a demand for increasingly cost-effective and comprehensive solutions, which would constantly improve industrial processes and limit pollution (Salzman 2010).  The Halliburton Loophole allows the natural gas industry to operate without the public scrutiny and legal permits to which all other point sources of pollution are subject.

Arguments in Favor of the Halliburton Loophole

The creators of the law in question claimed to have logical reasons, other than corporate greed and government corruption, for exempting hydraulic fracturing from the aforementioned legal restrictions. The strongest piece of support for the Loophole is that federal regulation of the industry is not necessary because individual states are better informed and empowered to understand their own situation and create their own governance. Lawmakers have also proposed that the SWDA and CWA regulations are not necessary because other regulations thoroughly regulate the industry. Pennsylvania’s Department of Environmental Protection Secretary Michael Krancer testified to Congress that other regulatory laws suffice in fracking oversight, saying that “The Energy Policy Act of 2005 has no impact whatsoever on the state and federal laws that prohibit oil and gas extraction operations from causing surface water or ground water pollution. The whole of oil and gas operations are subject to the federal Water Pollution Control Act and is prohibited from causing pollution to the waters of the United States. In Pennsylvania, all aspects of oil and gas exploration and extraction, including drilling and fracing operations, are regulated by the state’s Oil and Gas Act, the Clean Streams Law and our water protection regulations. The fact is that the so-called and misnamed “Halliburton Loophole” in no way diminishes the statutory and regulatory coverage of our laws as applied to gas extraction.” (Philips 2011) Additionally, the bill had bipartisan support showing that it was not the product of one party’s affiliations (Philips 2011.)

Arguments Against the Loophole

The strength and number of arguments that oppose the Halliburton Loophole are far greater than any in its favor. First, there has been no evidence to show why fracking earns these exemptions when every other industrial process does not have the same luxury. There is scientific reasoning to show that the regulations in the SDWA and CWA are not necessary for fracking.  Even EPA Administrator Lisa Jackson has said that federal standards are needed (Philips 2011).

Contrary to the argument presented in the earlier section, that states are better informed and empowered to self-govern industry, states have economic interests and can also be extremely biased for or against industry depending on the political party in charge. Pennsylvania in particular did not have appropriate regulation over the industry when it was first developing within the state, so regulation defaulted to counties and local governments. When regulation varies between states, and especially between local governments, it is more difficult and expensive for gas companies to operate because rules are constantly changing between locations. In this case, states or local governments default to making the regulations as low as possible in order to attract gas companies and retain the most economic benefit despite externalities imposed on the environment and public health (Salzman 2010). The Water Pollution Control Act referenced by PA DEP Secretary Michael Krancer regulates municipal waste treatment plants and not fracking, so the law does not replace regulations that would have been provided by the SDWA and CWA (Philips 2011).

The most controversial point of discussion about the Halliburton Loopholes is the strong connections lawmakers had to the natural gas industry. Former Vice President Dick Cheney no longer held stock in the Halliburton company he used to work for, but he left the company in an extremely poor financial state after a series of failed mergers. In addition to personal connections and pressure, many reports have theorized that Cheney felt the need to make legislative change that would help his company because he felt an obligation to the company’s shareholders (Briody 228). After leaving the company to serve as Vice President, Cheney was still receiving a “deferred salary from Halliburton in the years since he left the company.” (Briody 228) An investigative report done by the Congressional Research Service stated that Cheney’s relationship with Halliburton “constitutes not only a financial interest, but a conflict of interest as well” and that a public servant owes undivided loyalty to the government. The overall national consensus is that Cheney support the Act for his own personal interests and the benefit of Halliburton (Briody 229).

Ethical Analysis

It is evident that the decisions made to pass the Halliburton Loophole were biased and not based on any sort of moral ground. Environmental ethics can serve as an analytical platform for making regulatory decisions that affect both the industry and the environment. The definition of environmental ethics according to the Stanford Encyclopedia of Philosophy is “the discipline in philosophy that studies the moral relationship of human beings to, and also the value and moral status of, the environment and its nonhuman contents.” (Brennan 2008) The dilemma within environmental ethics is why respecting the environment is necessary. Is it necessary because the environment is needed to sustain human well being, or does the environment have value in its own right? It is a case of instrumental verse intrinsic value. Historically, industrial regulation has focused on protecting both intrinsic and instrumental value, but instrumental has had a greater focus.

By focusing on the instrumental value of the environment, it is easier to use a cost-benefit approach to decision making. Environmental ethics says that human activity should cause as little harm to environment as possible. Rather than determine what costs are acceptable to impose on the environment for the resulting benefit, costs should be absolutely minimized. It is often assumed that development at the sake of the environment is unavoidable (Brennan 2008). In this case, it was assumed that in order to spur energy production that environmental sacrifices had to be made, in form of the legal exemptions. With increasing technological capabilities, development does not have to come with detriment to the environment. If the purpose of the Energy Policy Act of 2005 was truly to create a stronger energy infrastructure that would benefit the nation, then the government would have supported energy sources that are not negative towards the environment. This way, ecological and public health would not have been sacrificed and energy development could have occurred. Environmental ethics is based on humans’ inherent connection and interdependence on the natural world (Bookchin 1987). Everything that humans rely on for life and desire starts with the natural resources of the planet.  If government officials would have created an energy policy that is based on protecting the instrumental value of the environment, then all other desired national improvements would follow (Bookchin 1987).

Despite any disagreement about the value of the environment compared to the value of industry development and energy production, most people will agree that government officials have a duty to make decisions that are in the best interest of the public. From any morally sound standpoint, a decision affecting the entire country should not be made by a small group of politicians for their own personal benefit of the benefit of one company. From the position, Dick Cheney’s actions and the passing of the Halliburton Loophole showed a complete disregard for public duty. It is an egregious example of the government not acting in the best interest of Americans.

Conclusion

The water Americans drink is not appropriately protected by the United States Federal Government. Legislation intended to provide water that is acceptable for human consumption has been undermined. Although it is difficult to assign value to the environment, the decision to pass the Halliburton neglected any value to the environment for the sake of personal and industrial economic gains. The value of public health provided by a protected environment should outweigh the value of economic increase resulting from a lack of environmental regulation. The purpose of economic improvement is to better the lives of citizens, and should not come at the cost of the environment and public health that those lives depend on.

Works Cited

Bookchin, M. (1987). Social ecology versus deep ecology: A challenge for the ecology movement. World Heritage,

Brennan, A. (2008). Stanford encyclopedia of philosophy: Environmental ethics. Retrieved November 8, 2013, from http://plato.stanford.edu/entries/ethics-environmental/

Briody, D. (2004). The Halliburton agenda. Hoboken, New Jersey: John Wiley & Sons, Inc.

Earthworks. Retrieved November 3, 2013, from http://www.earthworksaction.org/issues/detail/inadequate_regulation_of_hydraulic_fracturing#.UomltOL7Vyq

Energy Policy Act of 2005 PUBLIC LAW 109–58, 322 (2005).

Hines, D. A. (March 8, 2012). The “Halliburton loophole”: Exemption of hydraulic fracturing fluids from regulation under the federal safe drinking water ac.

Philips, S. (2011). Burning question: What would life be like without the Halliburton loophole?. Retrieved November 3, 2013, from http://stateimpact.npr.org/pennsylvania/2011/12/05/burning-question-what-would-life-be-like-without-the-halliburton-loophole/

Salzman, J., & Thompson, B. H. (2010). Environmental law and policy Thompson Reuters.

US EPA. (2012). Clean Water Act. Retrieved November 3, 2013, from http://cfpub.epa.gov/npdes/cwa.cfm?program_id=45

US EPA. (June 2004). Drinking water standards and health effects (EPA 816-F-04-037 ed.) EPA.

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