Potential contamination, reduced water supplies and infrastructure and cost pressure due to fracking mean that water utilities could suffer severe credit deterioration, according to a new report by Fitch Ratings.
Since fracking companies are not required to disclose all chemicals they use in their operations, and because some chemicals may not be regulated, they can pass through water treatment facilities and remain undetected in tests. According to the company's managing director Douglas Scott, contamination resulting from fracking would result in an immediate halt in water supplies, which would incur financial losses in itself, but the detrimental impact this could have on public perception would be felt over a much longer period of time than the actual cleanup would take.
More than half of all fracking sites in the country are located in areas with increased water stress, so adding the risk of having their water resources contaminated is a serious problem, Fitch Ratings said in a statement that was published by Reuters. In addition, the boom of the oil and gas industry is leading to an increase in population in fracking-intensive areas because of the available jobs there, forcing local water utilities to meet higher demand over a short period of time. Over the longer term, a smaller population of ratepayers could be forced to finance the local utility's increased level of debt after fracking operations diminish, the report noted.