Acfan was one of over a hundred groups nationwide that signed onto an Environmental Working Group letter to Richard Cordray, head of the new U.S. Consumer Financial Protection Bureau, calling on the Bureau to investigate the shale industry’s deceptive practices that conceal the industry’s inherent risks from potential leasors. In a press statement, EWG’s assistant general counsel Thomas Cluderay stated, “As we continue to weather this country’s housing crisis, regulators must prevent oil and gas companies from using deception to acquire drilling leases – deception that could carry ramifications for homeowners and lenders.”
“We encourage the CFPB to look into the risks that homeowners and their families face in signing these lease contracts, such as inadvertently signing away their property rights and potentially losing the value of their homes or being stuck with water unsafe to drink,” said Ellen Bloom, director of federal policy for Consumers Union.
The Sept. 13, 2012 letter reads in part,
“On behalf of the undersigned, the Environmental Working Group (EWG) would like to congratulate you on becoming director of the newly created U.S. Consumer Financial Protection Bureau (“Bureau”). As you develop the Bureau’s priorities, we ask you to give attention to the impact of deceptive oil and gas leasing practices on U.S. property values and mortgages, particularly as companies increasingly rely on the technology known as hydraulic fracturing.
Specifically, we ask the Bureau to:
• Investigate the extent to which oil and gas companies misrepresent or fail to disclose the risks of drilling and hydraulic fracturing when they approach landowners to lease their land for drilling operations;
• Develop robust disclosure standards and other regulations that would prevent oil and gas companies from engaging in deceptive leasing practices and hold them accountable for representations made by their leasing agents; and
• Work with state regulators, the lending community, insurance companies and public interest groups to develop a campaign to educate the public about the ways that oil and gas leases may affect property values and mortgages.
Taking these steps will ensure that oil and gas companies, eager to exploit U.S. oil and gas deposits, do not take advantage of unsuspecting property owners, potentially exposing them to significant losses and liabilities.
Inherent Risks of Drilling and Hydraulic Fracturing
By drilling companies’ own admission, drilling and hydraulic fracturing are inherently risky activities. Oil and gas companies regularly send their shareholders and potential investors long lists of potential hazards incident to drilling. For example, XTO Energy Inc., a subsidiary of Exxon Mobil Corporation, the nation’s leading natural gas producer, has told its investors that:
“Our operations are subject to hazards and risks inherent in drilling for, producing and transporting oil and natural gas, such as:
• fires;
• natural disasters;
• explosions;
• pressure forcing oil or natural gas out of the wellbore at a dangerous velocity coupled with the potential for fire or explosion;
• weather, including hurricanes in the Gulf of Mexico;
• failure of oilfield drilling and service tools;
• changes in underground pressure in a formation that causes the surface to collapse or crater;
• pipeline ruptures or cement failures; and
• environmental hazards such as natural gas leaks, oil spills and discharges of toxic gases.” [see citation in letter]
These risks are not hypothetical. As far back as 1987, the U.S. Environmental Protection Agency detailed dozens of cases of gas and oil drilling-related contamination in a report to Congress.2 State officials in Colorado, Ohio, Pennsylvania and Wyoming have also documented water pollution attributed to oil and natural gas drilling. [citation]
Potential Impact on Property Values and Mortgages
Risks associated with drilling and hydraulic fracturing have implications not only for public health and the environment, but also for property owners and the lending community….”