Fracking all the way to the bank

Governor Andrew Cuomo, you have some company.

It turns out that New York is not the only state selling its soul to the natural gas industry this summer. Good ol’ North Carolina is joining the fracking bandwagon, too, and opening up its landscape to the unlovely risks of mini-earthquakes, water pollution and disease dissemination.

This past week, just in time to mark our nation’s birthday, repugicans in the North Carolina state legislature overrode a veto by Governor Beverly Purdue to give a green light to hydraulic fracturing. Drill, baby, drill!

Still, the vote was a close-run thing. The repugicans only prevailed because a veteran Democratic lawmaker, Becky Carney, mistakenly cast the deciding vote after a marathon legislative session late Monday night. She opposes fracking but inadvertently gave the repugicans the votes it needed to override the governor’s veto.

She cried when she realized her mistake – and with good reason. The industry has too much political juice to give its opponents room for error. The wider the fracking debate spreads, in fact, the more it becomes clear that conflicts of interest abound at every turn.

According to The Institute for Southern Studies, North Carolina state lawmakers took two fact-finding trips to Pennsylvania to investigate the issue. Their guide was a gas company facing multiple federal and state investigations into possible fracking-related violations, Oklahoma-based Chesapeake Energy. No prizes for guessing which “facts” they found.

One of Chesapeake’s business practices, according to a Reuters investigation, is to conspire with its top competitor, Encana Corp of Canada, to avoid bidding against each other in land-purchasing deals, all the better to keep prices artificially low. According to the piece:

In one email, dated June 16, 2010, [CEO Aubrey] McClendon told a Chesapeake deputy that it was time "to smoke a peace pipe" with Encana "if we are bidding each other up." The Chesapeake vice president responded that he had contacted Encana "to discuss how they want to handle the entities we are both working to avoid us bidding each other up in the interim." McClendon replied: "Thanks."

Shocker, that is not the only price-fixing natural gas scandal out there. Citizens for Responsibility and Ethics in Washington (CREW, where I worked for years as the Deputy Director) has asked the Justice Department’s Antitrust Division to initiate an investigation into whether large natural gas producers, including Chesapeake and ConocoPhillips, are illegally conspiring to limit their production in a bid to raise demand and increase prices.

Turns out, over the past few months, natural gas prices have dropped to a ten-year low while inventories have increased dramatically. Clearly, it’s in the companies’ business interests to reverse that. The question is whether they are violating antitrust laws in the process – and whether the state legislatures they are so effectively targeting for new business even care.

What is so galling about all these anti-competitive practices by the natural gas industry is that on the one hand they conspire to push gas prices higher by reducing production and on the other they attack President Obama and the Democrats for not agreeing to give them more wells to drill.

The companies want government both ways – active on their behalf and inactive on everyone else’s. Our legislators should be smart enough not to fall for it.