Environmental Pushback Is Forcing a Controversial Fracking Company to File for Bankruptcy

By: Stephanie Bontorin | Published: May 21, 2024

A subcontractor for large oil and gas companies has been forced to shutter their operations. Environmental issues in several states and large mergers have caused the company to lose millions in revenue. 

The issues have risen out of concern about the adverse effects that fracking has on the environment. Several states, including California, Delaware, Florida, Maryland, New Jersey, New York, Pennsylvania, Oregon, Vermont and Washington all have bills in the process to ban the controversial practice.

What Is Hydraulic Fracking?

Fracking often comes hand-in-hand with drilling underground for natural oil and gas. Once abundant oil wells begin to dry up, fracking companies extract the remaining natural resources.

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Fracking is especially harmful to the environment because it does not just extract oil. The process forces highly toxic liquids or gases deep into the Earth to break apart tight rocks. The toxic liquids and gases often seep into nearby waterways and underground aquifers. Also, the action of breaking apart geological structures underground can have devastating consequences should an earthquake occur as a result.

Texas First To Ban the Practice

The process first became banned in the state of Texas in 2015 when it began to have negative environmental implications.

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Although Texas relies heavily on the oil and gas industry to provide jobs and state income, the immeasurable effects of fracking could no longer be ignored by state legislators who faced an outcry from citizens across the political spectrum. The bipartisan issue has gained support from lawmakers around the country. 

Several Environmental Groups Have Pushed To Stop Fracking

Groups like the Sierra Club and Americans Against Fracking have dedicated their mission for several reasons.

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They claim that fracking is so destructive because it causes widespread groundwater contamination, the devastation of nearby neighbourhoods and wildlife preserves, and negatively impacts air and water quality while risking massive seismic events.

Oil and Gas Organizations Still Try To Make It Work

Although several states have begun cracking down on the process, oil and gas-backed organizations like the Independent Petroleum Association of America (IPAA) and Western Energy Alliance have maintained that fracking is necessary for oil production.

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The IPAA claims fracking has “brought cleaner air by significantly reducing the U.S. greenhouse emissions to 25-year-lows.” While the United States remains vigilant to reduce greenhouse gases, fracking remains detrimental to the environment despite the small amount of gas pollution emitted. 

Environmental Group Finds These Claims To Be False

The Sierra Club issued a statement related to the IPAA’s statements about fracking’s ability to help reduce greenhouse gas emissions.

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On its website, the group refutes the assertion that fracking has a net positive environmental impact, stating, “There is clear evidence that natural gas and oil extracted by fracking are major greenhouse gas contributors. Methane released via extraction and transport is 86 times more potent as a greenhouse gas than CO2 over a 20-year time frame.”


Bankruptcy Filed by Nitro Fluids

The subcontractor filing for Chapter 11 bankruptcy is Nitro Fluids, a Texas-based firm that provides fracking-related materials and services to large oil and gas companies.

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The company filed for bankruptcy on May 15th with the U.S. Bankruptcy Court for the Southern District of Texas in Victoria, citing severe financial distress from a massive industry decline. In the paperwork filed, the company claims to have implemented a marketing process for one or more transactions.


Tens of Millions Owed by the Company

In a bankruptcy filing, companies must list their debts, cash on hand, and liabilities so that the courts can effectively transfer their money to any outstanding balances and help the group close out their business.

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The group listed $50 million to $100 million in assets and liabilities, which is most likely the sum of any factories owned, materials, and equipment. They cited $234,000 cash on hand and owed more than $38.2 million in funded secured debt obligations and $14.4 million in unsecured debt.


Details on the Debtor's Obligations

The company alleges that it is unable to generate enough income to pay down its massive debts. With a combined $52.6 million owing and less than a quarter of a million on hand, the company has spent all its borrowed cash. To repay the substantial debt, the company would need to generate tens of millions a year or more.

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The paperwork filed also cites trade obligations that have been affected by the serious economic downturn in oilfield fracking services since 2020. As public interest grows around the subject, lawmakers have begun to take action.


Massive Decline in Monthly Revenue

The debtor has noted that their monthly revenue declined from more than $1.2 million in 2023 to less than $100,000 as recently as March 2024. The company attributed the decline in revenue to the merger consolidation among the companies that used to contract Nitro Fluids for work.

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Source: Freepik

After one of their main clients, Earthstone, was acquired by Permian Resources (PR), the company saw an immediate 50% decline in revenue.


Further Insolvency Was Discovered

After filing for bankruptcy, more information about Nitro Fluid’s financial situation came to light.

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Court proceedings show that the company defaulted on a $36.95 million secured loan to Simmons Bank NA.


Nitro Fluid Is Also Facing Massive Lawsuits

In addition to the mourning financial issues, Nitro Fluid has also encountered legal controversy that could cost them up to $8.9 million.

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A jury awarded Cameron International Corp. the massive payout after a patent infringement lawsuit was filed against Nitro Fluid. However, at this time, no financial restitution has been paid.