Sierra Club Spurns $30 Million Gift as Fracking Turns Toxic

Environmental and health groups are calling for tougher U.S. regulation of hydraulic fracturing for natural gas, turning on a one-time donor to their causes: Chesapeake Energy Corp. (CHK)

The Sierra Club, the largest U.S. environmental group, is rethinking early support of natural-gas development after activists and scientists linked the drilling to tainted water and increased air emissions, Executive Director Michael Brune said yesterday in an interview. The group turned down $30 million from Chesapeake after he took over in 2010, he said.

“Five years ago most environmental groups thought of gas as a clean but flawed alternative” to coal, Brune said at a Bloomberg Government breakfast with reporters and editors in Washington. “The more we heard from people” with water issues “the more we realized that there were more problems with gas than we thought.”

The American Lung Association, which like the Sierra Club got donations from Chesapeake, is urging the Environmental Protection Agency to force gas drillers to cut down on methane emissions, calling for tougher rules even as industry asks to weaken the standards. Those EPA rules are now being reviewed by the White House.

Taken together, the calls show that fracking is becoming toxic for Washington-focused environmental groups, which once backed cheap natural gas as a way to push out coal-fired power plants and cut the carbon-dioxide emissions scientists blame for causing climate change.

‘Anything But Coal’

“Groups like the Sierra Club have been consumed until relatively recently with an ‘anything but coal’ agenda,” Anthony Ingraffea, a professor of engineering at Cornell University and critic of fracking, said in an interview. “When shale gas came around, the groups found themselves wittingly or unwittingly painting themselves into a corner.”

Brune disclosed last month that the San Francisco-based Sierra Club got $26 million from subsidiaries or individuals associated with Chesapeake Energy, the second-largest U.S. natural-gas supplier. Brune said that in 2010, after he became executive director, he halted the corporate gifts, meaning the group walked away from an additional $30 million from Chesapeake. The group hasn’t returned the donations, used to “kickstart” its Beyond Coal campaign, he said yesterday.

“If you look at everything that the Sierra Club is concerned about, both Chesapeake and our industry groups are addressing them,” Michael Kehs, a spokesman for Chesapeake, said in an interview today.

Lung Association

The Sierra Club announced in July a $50 million, four-year gift from Bloomberg Philanthropies, formed by New York Mayor Michael Bloomberg, for the coal campaign. Bloomberg is founder and majority owner of Bloomberg News parent Bloomberg LP.

Chesapeake also aided the American Lung Association. In its 2010 annual report, the group credited the Oklahoma City-based company, saying it “generously funded” the Fighting for Air public-service campaign. The amount wasn’t disclosed.

Natural-gas futures have declined 23 percent this year amid mild winter weather and record production, aided by a surge in fracking. Gas fluctuated today amid forecasts for warmer-than- normal weather this month that may limit demand.

When burned to generate electricity, natural gas emits half the carbon dioxide of coal, and almost no mercury, according to the EPA. The record has endeared the fuel to public-health groups.

‘Less Pollution’

“We’re about less emissions,” Peter Iwanowicz, assistant vice president of the Healthy Air Campaign at the lung association, said in an interview. “What comes out at the stack really matters,” and that’s less pollution with gas, he said.

Iwanowicz and Brune said their groups now are watching methane that escapes as companies first drill for gas, using a process that rams a mix of water, chemicals and sand into rock to free trapped gas.

Once those emissions are considered, natural gas releases more greenhouse gas emissions than coal, according to an analysis by Ingraffea. Experts such as Michael Levi of the Council on Foreign Relations dispute that analysis, saying it overstates the amount of leaking methane and doesn’t count the higher efficiency of natural-gas power plants.

And it’s not just emissions. Earthquakes last year in Ohio were probably caused by wastewater from drilling that was injected into a disposal well, a state report said last week. The EPA is now analyzing water from communities in Pennsylvania and a town in Wyoming where residents say their wells were contaminated after fracking nearby.

Costs, Jobs

Industry groups are fighting off efforts by federal agencies to tighten rules on air, water and chemicals used in the gas drilling.

“More regulation could increase costs and delays for operators, which could harm new projects, sacrificing thousands of new jobs and depriving government of billions in revenue,” Kyle Isakower, vice president for economics and regulatory policy at the American Petroleum Institute in Washington, told reporters March 1. That group, which represents Chesapeake and companies such as Exxon Mobil Corp. (XOM) is pushing the EPA to delay implementation and ease off on requirements for drillers on air emissions, for example.

Weaker regulation isn’t what environmental groups say they want. Instead, Brune said new federal legislation is even needed to toughen government oversight.

“If loopholes aren’t closed, we shouldn’t feel confident that fracking is being done in a safe” manner, he said.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net;

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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