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The best case for and against a fracking ban

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During the Vice Presidential debate, Vice President Mike Pence accused former Vice President Joe Biden and California Sen. Kamala Harris of wanting to ban hydraulic fracturing.

“Joe Biden and Kamala Harris want to raise taxes, bury our economy over a $2 trillion Green New Deal,” Pence said. “They want to abolish fossil fuels and ban fracking.”

Harris was adamant that this was not true. “First of all, I will repeat, and the American people know, that Joe Biden will not ban fracking,” Harris said. “That is a fact. That is a fact.”

Biden’s plan to address climate change calls for the United States to zero out its greenhouse gas emissions by 2050 while helping the workers and communities that may suffer job losses in the switch to clean energy. It does not mention fracking at all.

Trump, meanwhile, has no published plan to deal with climate change. He has, however, relaxed environmental regulations around mining and drilling in the United States to boost US fossil fuel production.

Activists have pushed presidential contenders to address fracking — which involves pumping high pressure water, sand, and other chemicals into a rock formation to create fractures that can release trapped oil and gas — because it has radically reshaped the US economic, energy, political, and environmental landscape.

It’s turned the United States into the largest oil producer in the world. It helped pull the country out of a recession. It’s created boomtowns flush with cash in once sparsely populated parts of the country. At the same time, fracking has led to a reduction in greenhouse gas emissions in the US.

Wastewater injection from fracking wells has also caused a spike in earthquakes. It has caused local air quality and safety problems. And while they’re cleaner than coal, oil and gas from fracking are still fossil fuels.

For policymakers, the difficult choice is deciding whether the benefits outweigh the harm, and if fuels from fracking can be a stepping stone toward cleaner energy. “This is one of those issues where there’s just so much gray,” Sam Ori, executive director of the Energy Policy Institute at the University of Chicago, told Vox in 2019. “I don’t think that there’s a really clear case that says fracking is necessarily good or bad, on net.”

And for presidential candidates, it’s tough to find the right pitch to voters, who are themselves divided. A 2019 poll by KFF and the Cook Political Report of voters in the key swing states of Michigan, Minnesota, Pennsylvania, and Wisconsin, showed widespread support for proposals like the Green New Deal, but much less support for a fracking ban. In Pennsylvania, 69 percent of swing voters said they support a Green New Deal, but only 39 percent wanted to ban fracking.

It’s a microcosm of the broader policy discussion about the role of the fossil fuel industry in the carbon constrained future, whether it should be fought as an adversary or embraced as a partner.

As for fracking, researchers and analysts have been studying it for years and still continue to debate its merits. Here is a summary of the best arguments for and against a ban on fracking.

The best case against a ban: Fracking has reduced greenhouse gas emissions and helped expand clean energy

Though hydraulic fracturing as a technique has been around since the 19th century and the first commercial fracking for gas took place in the 1940s, the most recent fracking boom started in earnest around 2005. That’s when the rising prices of oil and gas forced energy companies to look for other sources, when related techniques like horizontal drilling and low-cost slickwater fracking matured, and new estimates revealed the gargantuan amounts of gas stored in formations like Marcellus Shale.

Fracking has now become the dominant technique for extracting oil and gas in the US.

A chart showing the monthly crude oil and natural gas wells by drilling type.
Fracking with horizontal drilling has quickly overtaken other forms of oil and gas extraction in the US.
Energy Information Administration

Fracking has risen against the backdrop of the United States’ massive carbon footprint. The US is responsible for the highest share of cumulative global greenhouse gas emissions of any county. Currently, it’s the second-largest emitter in the world, behind China. It also has some of the highest per capita emissions in the world.

Scientists have warned that if humanity wants to limit warming this century to 1.5 degrees Celsius above pre-industrial levels, countries would need to halve global emissions by as soon as 2030 and reach net-zero emissions by 2050.

During much of the fracking boom, the US economy grew and emissions declined. One study found that between 2005 and 2012, fracking created 725,000 jobs in the industry, not counting related supporting jobs. “This has been one of the most dynamic parts of the U.S. economy — you’re talking about millions of jobs,” Daniel Yergin, vice chairman of IHS Markit and founder of IHS Cambridge Energy Research Associates told CNBC.

That’s largely due to natural gas from fracking displacing coal in electricity production. Natural gas emits about half of the greenhouse gas emissions of coal per unit of energy. It doesn’t have the massive land footprint that open pit mining or mountaintop removal coal mines do. While it has its own pollution problems, burning natural gas doesn’t produce pollutants like ash and mercury, which can pose health and environmental hazards for years.

Total US greenhouse gas emissions
The advent of fracking has led to a decline in US greenhouse gas emissions.
Environmental Protection Agency

“Regardless of what you believe about the future, shale gas has played a substantial role in getting rid of carbon emissions and conventional emissions from coal,” said Ori.

A 2013 report from the Breakthrough Institute titled “Coal Killer” explained that coal-fired power generation declined from producing 50 percent of US electricity in 2007 to 37 percent in 2012. Natural gas from fracking largely rose to fill that void.

The main reason for this shift is that fracked natural gas is cheaper than coal for the energy it produces. That makes it attractive for utilities, especially in competitive markets. Many natural gas power plants use combined-cycle gas turbines. Not only do they produce 50 percent more energy for the same amount of fuel compared to a single-cycle turbine, they can spool up quickly to meet surges in demand or shortfalls from other power producers. Compared to coal and nuclear power plants that have a harder time ramping up and down, this added flexibility makes natural gas power plants particularly valuable on the grid.

Even the newest, cleanest, more efficient coal-fired power plants struggle to compete with natural gas.

Natural gas’s flexibility has also eased the integration of variable renewable energy sources like wind and solar power. When the breezes slow down and clouds form above, natural gas steps in. This has reduced the need for other ways to compensate for intermittency, like energy storage.

In fact, as fracking has grown in the US, renewable energy generation has doubled since 2008. Renewables, including hydropower and biomass, now comprise just over 17 percent of total US electricity generation. Coupled with nuclear power, about 19 percent of the electricity mix, that still leaves nearly two-thirds of power generation that needs to decarbonize. And that will take years.

So fracked natural gas’s record as a coal slayer and renewable energy booster makes it a valuable weapon in the fight against climate change.

“If you’re talking about natural gas as a decarbonizing fuel while replacing coal, I think the facts on the ground really support that,” said Alex Trembath, a coauthor of the “Coal Killer” report and deputy director at the Breakthrough Institute. “We’ve actually seen significant growth in solar and wind in particular even alongside the fracking revolution.”

At the same time, fracking has helped insulate the US from global economic shocks, particularly in oil markets. US shale oil has provided more than half the growth in global oil supplies, so rising tensions and disruptions in countries like Iran, Libya, and Venezuela have barely moved the needle at the gas pump.

“The oil price impacts of those big disruptions have been pretty muted and a lot of that has to do with the incredible growth of shale oil as a source of new supply in the global market,” Ori said.

In short, natural gas obtained by fracking has reduced emissions, aided the economy, and helped clean energy rise, while costing less than dirtier fuels.

The best case for a ban: Fracking keeps us dependent on fossil fuels and undermines decarbonization

Both the oil and natural gas produced from fracking have their downsides. Natural gas is mainly used for power generation (it’s now the largest source of electricity in the US) while oil is mostly used for transportation, like cars, shipping, and aviation.

So while low natural gas prices have helped knock dirty coal off the market, low oil prices driven in part by fracking have encouraged more travel. In fact, transportation is now the largest source of greenhouse gases in the US. And after years of decline, US emissions in 2018 rose by 3.4 percent.

Transportation is the largest source of energy-related greenhouse gas emissions in the United States.
Power-related emissions declined and transportation emissions rose, driving overall US emissions upward.
Rhodium Group

Low oil prices have undermined the business case for cleaner transportation alternatives, like electric cars and fuel cell-powered buses. Instead, the United States has experienced a growing appetite for larger, thirstier cars and more air travel.

Meanwhile, low natural gas prices have had some collateral damage for nuclear power, the largest source of clean electricity in the US. Some of the nuclear power plants that have announced early retirements are likely to see their capacity replaced by natural gas. So while replacing coal with natural gas often leads to a reduction in emissions, replacing nuclear leads to an increase.

Natural gas itself can also become a climate problem. Methane, the dominant component of natural gas, produces less carbon dioxide than coal when burned. But if methane leaks, which it often does in some quantity during normal gas extraction operations, it becomes a potent greenhouse gas. Over 100 years, a quantity of methane traps more than 25 times the amount of heat compared to a similar amount of carbon dioxide.

Of course, methane is the product, so the gas industry has an incentive to limit leaks. But leaks are difficult to track, and they could easily overwhelm the gains from replacing coal.

Robert Howarth, a researcher studying shale gas at Cornell University, recently reported that US shale gas production plays an outsized role in global methane emissions. He estimated that over the past 10 years, more than half of the global increase in methane emissions came from fracking in the US.

“Natural gas production in the United States is leaking somewhere in the neighborhood of 3.5 percent of the gas we produce into the atmosphere which is, you know a relatively small amount of gas if you think about it. Most of it is getting to market,” Howarth said. “But that 3.5 percent is enough to do severe damage to the climate.”

This is a higher leakage estimate than what the EPA and the industry calculate, but with the Trump administration’s ongoing rollbacks on Obama-era regulations on monitoring and restricting fugitive emissions of methane, the problem is poised to worsen.

And then there’s the technique of fracking itself. It requires a massive volume of water. Wells can release toxic chemicals like benzene into the air. Fracking sites can experience explosions and fires. They can contaminate drinking water. More than 17 million people in the US live within a mile of an active fracking well and research shows that fracking can lead to low birth weight in infants born in that radius.

Many of these environmental risks, on balance, are less than those associated with mining and burning coal. However, the sudden surge in fracking means that many people are being confronted with its impacts for the first time, making it a more vivid political concern. That’s in contrast to coal hazards, which are mostly grandfathered into the public consciousness.

Another factor is that the business case for fracking is starting to weaken as more drillers declare bankruptcy. The Rocky Mountain Institute estimates that clean energy is already competitive with new natural gas power plants, and by 2035, it will be cheaper to build new wind, solar, and storage projects than to continue running 90 percent of existing gas power plants.

And when it comes to limiting climate change, a key factor is time. Methane leaked from gas wells can stay in the atmosphere for a decade. Carbon dioxide from burning it can linger for a century. So it is imperative to ramp down greenhouse gas emissions as quickly as possible. Yet every new natural gas power plant represents a decades-long commitment to continue using the fuel. That means gas plants will have to install carbon capture systems, which would add to their operating costs and worsen the business case further, or some poor investor is going to be left holding the bag.

“Not only is natural gas dangerous and destructive, it’s increasingly unnecessary,” said Michael Brune, executive director of the Sierra Club. “We do think there should be a national ban on fracking.”

What can a president actually do about fracking?

President Obama often boasted about the rise of the United States as an energy producer. President Trump has pushed to leverage US oil and gas in order to exert energy dominance. But it’s clear that the era of bipartisan support for fracking at the national level has come to an end.

Now some Democrats are openly hostile to the fossil fuel industry, with Sen. Bernie Sanders calling for criminal prosecution of some companies. Democratic presidential candidates were asked about their stance on fracking during the CNN climate town hall, and they will likely continue facing questions throughout the campaign.

The federal government can limit export licenses for oil and natural gas. However, a lot of the energy policy in the United States is governed at the state and local level, so a president can’t easily shape the agenda without local backing.

At the local level, despite environmental and safety concerns, voters have been reluctant to restrict fracking. A ballot measure that would have severely restricted fracking in Colorado failed in 2018, despite Democrats winning the governorship and majorities in both state houses.

Breakthrough’s Trembath argued that a president would best be served by building an off-ramp for the bridge rather than cutting it off. It would be less disruptive and contentious and would allow the country to continue harnessing the benefits of fracking while coming up with better options.

“The first way we hasten the end of the bridge is to make the [alternative] technology cheaper,” he said.

That would require investment in clean energy research and development, particularly for technologies like long-duration energy storage and advanced nuclear. Pricing carbon dioxide would also help ensure that the biggest sources of greenhouse gases get reduced first, and the revenue these prices generate could fund further research. Biden’s climate plan calls for “domestic polluters bear the full cost of their carbon pollution.” So while fracking may continue under a Biden administration, it may become more costly over time.

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Samsung shares rise on restructuring hopes after chairman’s death

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Shares in Samsung Electronics Co Ltd and its affiliates rose on Monday after the death a day earlier of Chairman Lee Kun-hee raised investor hopes of a restructuring and stake sales, analysts said.

Investors were betting that such measures would be needed for his heirs to pay a hefty inheritance tax, estimated at about 10 trillion won ($8.9bn) for stock holdings alone, although analysts were divided on which moves the group would make.

Shares in Samsung C&T – a sprawling conglomerate involved in businesses ranging from construction to trading and holiday resorts – and Samsung Life Insurance rose as much as 21.2 percent and 15.7 percent respectively, while Samsung BioLogics, Samsung SDS – a global software solutions and IT services company – and Samsung Engineering also rose.

“The inheritance tax is outrageous, so family members might have no choice but to sell stakes in some non-core firms” such as Samsung Life, said NH Investment Securities analyst Kim Dong-yang.

Lee died on Sunday with his family by his side, the company said in a statement, without mentioning the cause of death. His family will hold a private funeral. He had been hospitalised since a heart attack in 2014 and was treated for lung cancer in the late 1990s.

Samsung shake-up

Investors have long anticipated a shake-up in the event of Lee’s death, hoping for gains from any restructuring to strengthen de facto holding company Samsung C&T’s control of crown jewel Samsung Electronics. Analysts say one such move could involve Samsung C&T buying an affiliate’s stake in the tech giant.

Son and heir apparent Jay Y Lee has a 17.3-percent stake in Samsung C&T, which owns a 5.01-percent stake in Samsung Electronics, the global leader in smartphones and memory chips. Samsung C&T also has a 19.3-percent stake in Samsung Life, the number 2 shareholder of Samsung Electronics.

[Bloomberg]

The younger Lee is undergoing two separate trials over suspected accounting fraud and stock price manipulation connected to a 2015 merger and concerning his role in a bribery scandal that triggered the impeachment of former South Korean President Park Geun-hye. He has repeatedly denied any wrongdoing.

“At this point, it is difficult to expect when Samsung Group will kick off with a restructuring process as Jay Y Lee is still facing trials, making it difficult for the group’s management to begin organisational changes,” KB Securities analyst Jeong Dong-ik said.

The late chairman was the wealthiest stock owner in South Korea. His holdings included 4.18 percent of Samsung Electronics common shares and 0.08 percent of its preferred shares – which carry no board voting rights but whose holders would be paid out before common shareholders in the event of a liquidation. Together, the stakes are worth about 15 trillion won ($13.3bn).

He also held a 20.76-percent stake in Samsung Life worth about 2.6 trillion won ($2.3bn), and a 2.88 percent stake in Samsung C&T worth about 564 billion won ($500m) as of Friday’s market closing.

The Frankfurt Declaration

Samsung, the maker of the Galaxy line of smartphones, has been riding a COVID-era boom in online activity despite the legal clashes. The company also supplies semiconductors for Google’s data centres and Apple Inc’s iPhone, and is the world’s most advanced maker of displays for TVs, computers and mobile devices.

Lee Kun-hee built the company into the electronics powerhouse of today, becoming synonymous with the rise of South Korea on a global economic stage.

Named one of the world’s 100 most influential people by Time magazine in 2005, Lee began overhauling Samsung Electronics after he saw the company’s products gathering dust in a Los Angeles electronics store, according to The Lee Kun Hee Story, a 2010 biography by Lee Kyung-sik. The Suwon, South Korea-based company had become known for cheap, low-quality electronics gear and was in the “second phase of cancer”, sending out 6,000 people to fix products made by 30,000 employees, Lee said in 1993, according to the biography.

The company’s makeover started that year when Lee gathered top executives in Germany and laid out a plan, known as the Frankfurt Declaration, to transform Samsung from a second-tier television maker into an industry leader. The company’s new mission: create high-quality products, even if it meant lower sales.

[Bloomberg]

Samsung Electronics became the world’s top maker of computer memory chips in 1992, the same year it became the first to develop 64-megabyte DRAM chips, according to the company.

After the Frankfurt Declaration, Lee required employees to arrive at work at 7am instead of their usual 8:30am start, so they could “soak up reform in their slumber”, according to the biography.

In 1995, he assembled 2,000 workers to watch him make a bonfire out of 150,000 mobile phones, fax machines and other company products that failed to meet his quality standards.

Lee’s cultural change eventually produced results. Samsung Electronics surpassed Tokyo-based Sony to become the top seller of flat-screen TVs in 2006, the same year its market value exceeded $100bn.

In 2010, Samsung introduced the Galaxy-branded smartphone running Alphabet Inc’s Android software, which helped it pass Apple as the world’s biggest smartphone maker in 2011 in terms of units sold. By introducing the Galaxy Note in 2011, Samsung created a new product niche known as the phablet, a smartphone-tablet hybrid.

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Australia’s Victoria logs zero COVID-19 cases, a first since July

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For first time in four months, Victoria state reports no new cases, raising hopes lockdown in city of Melbourne may be eased.

Australia’s Victoria state reported no new coronavirus cases or deaths on Monday, raising hopes that a stringent lockdown in the city of Melbourne will be eased.

It was the first 24-hour period without any new reported COVID-19 infections since the five million residents of Melbourne were locked down following an outbreak at quarantine hotels in July.

Victoria Premier Daniel Andrews on Sunday delayed the reopening of Australia’s second-biggest city amid an outbreak in Melbourne’s north.

Officials said they had tested about 15,000 people in the area and all had come back negative.

“This is one of the best outcomes we could hope to see,” said Jeroen Weimar, commander of testing and community engagement for Victoria.

Andrews is under intense pressure to lift Melbourne’s second round of stay-at-home restrictions, imposed when the state saw some 190 new cases a day in July, a figure that rose to 700 in August.

Some measures were lifted last week, allowing haircuts and golf games to return, but several rules remain in place, including limiting restaurant service to takeaways and deliveries, while non-essential shops have to remain closed and there is a ban on travel outside the greater Melbourne area or more than 25 kilometres (16 miles) from home.

Businesses and the federal government argue the continued curbs will delay Australia’s economic rebound.

Australia’s economy shrank 7 percent in the three months to the end of June, the biggest quarterly shrinkage since records began in 1959. The unemployment rate hit a 22-year high of 7.5 percent in July as businesses and borders closed to deal with the coronavirus.

Prime Minister Scott Morrison has highlighted the fact that neighbouring New South Wales state has much looser restrictions despite regularly reporting higher daily case numbers.

While the measures have taken a significant toll on the country’s economy, Australia has so far recorded just over 27,500 COVID-19 infections, far fewer than many other developed countries.

Separately, a paper published by the Actuaries Institute on Monday said physical distancing and lockdowns not only slowed the spread of COVID-19, they also saved the lives of about 400 people who would have been expected to die in June from respiratory illnesses such as pneumonia.

Examining Australia’s most recent official fatality data, the Actuaries Institute said there were fewer verified deaths than expected during the mid-winter month, which it concluded was due to a decline in respiratory illnesses.

“It is clear that lockdowns and other COVID-19 control measures have created great hardship for many in Australia. There will surely be medium and long-term consequences for physical and mental health and the economy,” said Jennifer Lang, convener of the Actuaries Institute’s COVID-19 Working Group.

“These measures have not only saved very many Australians from COVID-19 disease and death, they have also reduced deaths from a number of other causes.”

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Covid cases surge across the US

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Coronavirus cases in Italy rose by 21,273 on Sunday, according to Health Ministry figures, a new daily high for the country since the start of the pandemic.

A total of more than 525,000 cases have now been confirmed in the country.

On Sunday, a further 128 people died from the virus, bringing Italy’s total death toll to 37,338.

There are now 1,208 people with Covid-19 in Italy’s intensive care units.

The new figures come as Italy’s Prime Minister Giuseppe Conte acknowledged during a news conference announcing new restrictions that the “epidemic curve is rapidly increasing” in Italy.

But Conte said he wanted to avoid a nationwide lockdown like the one he imposed in March, because “the country could not afford it.”

Italy imposes new measures: New coronavirus restrictions are set to come into force in Italy on Monday.

Unlike the country’s national lockdown in March, not all economic and production activities are obliged to close under the new decree.

The main restrictions concern bars and restaurants and other food services. They must close at 6 p.m. local time and have no more than four customers per table. Gyms, swimming pools, theaters, cinemas, concert halls, bingo halls, casinos and beauty centers all must close.

Kindergartens and primary schools will stay open but to avoid overcrowded public transport, high schools must hold 75% of lessons remotely.

“We believe that during the next month (November) we will suffer a bit, but gritting our teeth and facing these restrictions, in December we will breathe again” Conte said.

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