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Regulating Natural Gas: What's the Right Balance?

By Amy Harder
energy and environment reporter, National Journal
April 23, 2012 | 6:00 a.m.
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What is the right balance of federal and state regulation for natural-gas production?

The Environmental Protection Agency announced last week the first-ever federal air-emissions rules for hydraulic fracturing, an extraction process that's seen as essential for developing vast reserves of shale gas recently found all over the world but is controversial for its environmental impact. The Interior Department is expected to soon propose draft rules requiring companies drilling on public lands to disclose the chemicals they use in fracking. In addition, numerous states have already moved ahead, or are planning to move ahead, with their own laws regulating the booming natural-gas industry.

How can President Obama and Congress strike the right balance of federal rules? How can the federal government work with state and local officials to ensure adequate cooperation among all levels of government? What should the role of the states be? Is the federal government doing enough--or too much--to regulate natural gas?

What's your assessment of the EPA rules announced last week? How do they fit into the larger regulatory dynamic?

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April 28, 2012 12:41 PM

Duplicative & Unnecessary Regulations

By Barry Russell

President, Independent Petroleum Association of America (IPAA)

Hydraulic fracturing has been widely implemented in the United States for nearly sixty-five years and has been used in over 1.2 million wells. During that time, it has been regulated by the states and the federal government utilizing authorities provided by the Clean Water Act (CWA) and Safe Drinking Water Act (SDWA) among others.

The CWA for example, regulates the discharge of pollutants, including flowback from fracturing operations, into U.S. waters. It also provides regulatory structure mandating spill prevention control and countermeasures. Meanwhile, SDWA sets regulations for the disposal of brine and other wastes. This state-federal arrangement has brought about a successful track record for the technology’s use, a revival of U.S. energy production and massive economic benefits to our nation, its communities and consumers.

This isn’t just my view, it’s the opinion of EPA administrator Lisa Jackson who noted, “you can't start to talk about a federal role [in hydraulic fracturing] without acknowledging the very strong state role." J...

Hydraulic fracturing has been widely implemented in the United States for nearly sixty-five years and has been used in over 1.2 million wells. During that time, it has been regulated by the states and the federal government utilizing authorities provided by the Clean Water Act (CWA) and Safe Drinking Water Act (SDWA) among others.

The CWA for example, regulates the discharge of pollutants, including flowback from fracturing operations, into U.S. waters. It also provides regulatory structure mandating spill prevention control and countermeasures. Meanwhile, SDWA sets regulations for the disposal of brine and other wastes. This state-federal arrangement has brought about a successful track record for the technology’s use, a revival of U.S. energy production and massive economic benefits to our nation, its communities and consumers.

This isn’t just my view, it’s the opinion of EPA administrator Lisa Jackson who noted, “you can't start to talk about a federal role [in hydraulic fracturing] without acknowledging the very strong state role." Jackson also added, "We have no data right now that lead us to believe one way or the other that there needs to be specific federal regulation of the fracking process."

Yet in spite of established science and well documented experience, a vocal minority is urging the president to push for greater regulation of the practice. The pleas of this group are not based on facts, but on anecdotes and unfounded claims. In response, many federal agencies have drafted regulatory proposals in recent months.

Most of these proposals are either un-necessary, duplicative or both. Two examples include the EPA’s promulgation of regulations governing pre-treatment standards for produced fluids and the agency’s new source performance standards for hydraulically fractured wells. In its rush to regulate, the EPA missed that industry and state regulators are already addressing these issues. Specifically, independent operators are using water recycling and disposal wells for water and brine waste management. They are also using green completion techniques, and other measures, to significantly reduce emissions from development operations.

Pursuing additional regulations for actions that are already occurring is an unwise use of increasingly strained taxpayer dollars. This is exactly what our nation should avoid if it hopes to continue enjoying the economic rebirth of its steel and manufacturing industries, both of which benefit from access to clean burning, affordable natural gas and oil supplies harvested utilizing hydraulic fracturing.

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April 25, 2012 11:24 AM

EPA'S Fracking Redundancy

By Bernard L. Weinstein

Associate Director, Maguire Energy Institute at Southern Methodist University and George W. Bush Institute Fellow

Though the U.S. natural gas industry has safely managed the hydraulic fracturing process for more than 50 years, environmental activists and alternative fuel lobbies have been hyping its risks for several years and pressuring the Obama Administration to engage the Environmental Protection Agency in overseeing shale gas extraction. Yet, there is not one verifiable instance of properly performed hydraulic fracturing causing direct harm to communities or individuals.

Still, the anti-carbon crowd believes that adding another layer of regulatory “oversight,” with its attendant compliance costs, will somehow retard development of this abundant and versatile domestic energy resource. Now the EPA has granted their wish with 588 pages of regulations on just one aspect of hydraulic fracturing: air pollution.

The EPA can regulate emissions of volatile organic compounds (VOCs) under the Clean Air Act. But the new rules are focused primarily on methane emissions even though they’re not currently covered by the Act. But aside from whether or not EPA has legitima...

Though the U.S. natural gas industry has safely managed the hydraulic fracturing process for more than 50 years, environmental activists and alternative fuel lobbies have been hyping its risks for several years and pressuring the Obama Administration to engage the Environmental Protection Agency in overseeing shale gas extraction. Yet, there is not one verifiable instance of properly performed hydraulic fracturing causing direct harm to communities or individuals.

Still, the anti-carbon crowd believes that adding another layer of regulatory “oversight,” with its attendant compliance costs, will somehow retard development of this abundant and versatile domestic energy resource. Now the EPA has granted their wish with 588 pages of regulations on just one aspect of hydraulic fracturing: air pollution.

The EPA can regulate emissions of volatile organic compounds (VOCs) under the Clean Air Act. But the new rules are focused primarily on methane emissions even though they’re not currently covered by the Act. But aside from whether or not EPA has legitimate jurisdiction, this new set of federal rules is largely duplicative.

When fracking fluids are withdrawn from gas wells, some VOCs, such as benzene, as well as methane, the principal component of natural gas, rise to the surface. Responsible companies already utilize technologies to capture the lion’s share of these gases, and recent studies by the Texas Commission on Environmental Quality (TCEQ) of 94 monitoring sites found only two cases where VOC and methane levels were above acceptable exposure levels.

Drilling companies across the nation have already adopted the “best practices” for gas capture that have been developed in the Barnett Shale of north Texas, where the shale gas revolution had its incubation. EPA’s layering of additional monitoring and reporting will simply drive up the cost of gas production with no measurable health or environmental benefits to the public.

It’s likely that EPA’s next move will be to require drilling companies to disclose all of the chemicals used in their fracking fluids. Here again, the states are way ahead of the game with most already requiring such disclosure. But that’s not likely to hold the EPA at bay. Federal oversight of the fracking process itself and disposal wells may follow.

In practice, the newly promulgated regulations may not turn out to be as draconian as they first appear. The broader issue is whether we want to pursue an energy strategy that encourages the production of abundant domestic energy resources, with all the economic and national security benefits that entails, or not.

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April 25, 2012 10:07 AM

Don’t Leave Science Out of the Equation

By Christine McEntee

Executive Director and CEO, American Geophysical Union

Our nation’s energy future – including the role hydraulic fracturing can/should play – is challenging on many levels, and there are many questions that still need to be answered. Some of those challenges are rooted in science and some are rooted in politics. Unfortunately, when it comes to talking about solutions, all too often the conversation is being framed in political terms alone, leaving science out in the cold.

Advancing technology is helping us to identify more and more accessible gas reserves in the U.S., and this can mean creation of new jobs and increased energy security. However, this growth must be managed in a way that protects our water quality, answers questions about waste management, addresses potential safety issues, such as seismic risk, and questions of resource availability. This is where science must play a bigger role.

When balanced equally in the ‘science and policy equation’, we know that science can inform solid policy decisions that will help enhance the public good. We also know that pitting the science agai...

Our nation’s energy future – including the role hydraulic fracturing can/should play – is challenging on many levels, and there are many questions that still need to be answered. Some of those challenges are rooted in science and some are rooted in politics. Unfortunately, when it comes to talking about solutions, all too often the conversation is being framed in political terms alone, leaving science out in the cold.

Advancing technology is helping us to identify more and more accessible gas reserves in the U.S., and this can mean creation of new jobs and increased energy security. However, this growth must be managed in a way that protects our water quality, answers questions about waste management, addresses potential safety issues, such as seismic risk, and questions of resource availability. This is where science must play a bigger role.

When balanced equally in the ‘science and policy equation’, we know that science can inform solid policy decisions that will help enhance the public good. We also know that pitting the science against the policy can risk the legitimacy of the science and the strength of the policy. That is what led the American Geophysical Union (AGU) to develop our first ever Science Policy Conference, which will take place in Washington, D.C. next week on May 1 – 2. And, as a part of that conference, we made a point to include a panel on hydraulic fracturing, which will cover the current state of research, economic projections, and potential water contamination issues associated with shale gas production (it’s part of a two day track on natural resources; that track is part of a four-track program that encompasses not only natural resources, but also natural hazards, the artic, and oceans). By presenting a balanced approach to the subject, we hope to ensure a real and productive discussion that will lay the groundwork for policy informed by science.

Scientific research and development has a long and successful history of supporting – and spurring – economic growth, while at the same time protecting public safety and the environment. When it comes to the management of natural resources in this country – whether it’s hydraulic fracturing and energy development in the Artic, or food security and the supply of rare Earth elements, if we have any hope of reaching conclusions that adequately balance the nation’s economic, environmental, and public health and safety needs, we need to allow science to play a role in assessing the options.

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April 25, 2012 9:44 AM

EPA's Flawed Rule Warrants Scrutiny

By Thomas J. Pyle

President, Institute for Energy Research (IER)

EPA’s announcement last week that it had finalized a rule to regulate emissions from hydraulic fracturing wells, processing plants, storage tanks, and pipelines was met with some amount of relief, as the agency had revised its regulation to allow two additional years for industry to comply. This obscures the larger point, however: should EPA be pushing through its rule in the first place? Even if one sets aside the fact that the United States is experiencing a natural gas renaissance without a single confirmed incidence of groundwater contamination, EPA’s rule has numerous methodological flaws and incorrect assumptions that deserve further scrutiny.

EPA’s proposed rule, called “Oil and Natural Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants Reviews,” was first proposed as a result of a deal with environmental groups and will bring several sources that have never been subject to federal regulation before under the yoke of the agency. In amending the NSPS and NESHAP standards in its r...

EPA’s announcement last week that it had finalized a rule to regulate emissions from hydraulic fracturing wells, processing plants, storage tanks, and pipelines was met with some amount of relief, as the agency had revised its regulation to allow two additional years for industry to comply. This obscures the larger point, however: should EPA be pushing through its rule in the first place? Even if one sets aside the fact that the United States is experiencing a natural gas renaissance without a single confirmed incidence of groundwater contamination, EPA’s rule has numerous methodological flaws and incorrect assumptions that deserve further scrutiny.

EPA’s proposed rule, called “Oil and Natural Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants Reviews,” was first proposed as a result of a deal with environmental groups and will bring several sources that have never been subject to federal regulation before under the yoke of the agency. In amending the NSPS and NESHAP standards in its rule, the EPA will bring an estimated 1.1 million wells that are already producing oil and gas under regulation, as well as 500,000 existing gas wells and the 11,400 new gas wells being drilled each year. The proposed rules also apply to approximately 600 natural gas processing plants, 3,000 compressor stations and 1.5 million miles of pipelines.

The problems with EPA’s rationale for wanting to bring these new sources under regulation are numerous. For example, although the proposed rules do not purport to regulate methane emissions, EPA states that the rule will yield about $1.6 billion in health and environmental benefits by reducing methane. However, according to a 2011 study by IHS-CERA, EPA’s analysis of how much methane is emitted by drilling and completing unconventional gas wells “lacks rigor” and “is at odds with industry practice and with health and safety considerations at the well site.”

Namely, IHS-CERA found that EPA based its methane emissions estimates on just four unaudited data points, “each of which was generated on the basis on multiple assumptions and rounded to the nearest hundred, thousand, or ten thousand million cubic feet prior to averaging.” Three of these data points describe methane that was captured for sale, rather than methane that was emitted. EPA also incorrectly made the assumption that all gas produced during well completions is vented into the atmosphere, rather than flared, unless it is required by state regulation. However, the study notes that cold venting of methane into the atmosphere is not standard industry practice, nor would it be acceptable for the safe operation of drilling sites. Because of these problems, IHS-CERA concluded that the benefits of EPA’s proposed rule are “overstated in terms of reducing air pollution and emissions of GHG,” and indeed, EPA’s analysis does not model the atmospheric temperature impact its rule would have.

Moreover, by EPA’s own omission, the agency cannot model the public health impacts that would be addressed by its regulations—although this is supposedly the genesis of the deal it struck with environmental groups. EPA writes, “with the data available, we are not able to provide credible health benefit estimates for the reduction in exposure to [hazardous air pollutants], ozone and [particulate matter] (2.5 microns and less) (PM2.5) for these rules.” Supportive data prior to proposing new regulations should be prerequisite, and the mere assertion that there will be health benefits is insufficient proof that a need exists. According to President Obama’s own Executive Order 13563, the regulatory system must be based on the “best available science,” and EPA’s failure to quantitatively assess the health effects is prima facie evidence that its rule is based on false promises of health benefits.

Lastly, EPA’s rule seems to ignore economic realities that seem blatantly obvious to even those unfamiliar with the concept of incentives. For example, the agency claims the capture of 3.4 million tons of recovered natural gas will actually benefit the natural gas industry to the tune of $30 million annually, which will end up offsetting the compliance costs. If industry can make a profit off of capturing natural gas, however, why would it need government regulation to make it do so? It makes no logical sense for companies to ignore technology that allows them to earn higher profits through efficiency, if it were truly that easy. In reality, these rules divert investments from capital and energy development into regulatory compliance efforts, and impose onerous notification, record keeping, monitoring, reporting, and performance testing requirements that industry will necessarily incur costs to keep up with. These costs, however, do not figure in EPA’s cost-benefit analysis.

These are but a few of the methodological problems that are rife in EPA’s proposed regulations for oil and natural gas well emissions, illustrating that the agency’s broken model cannot be expected to do what it says it will do. An infinitely more practical alternative that the agency did not consider would be to continue to make progress through the voluntary programs that already exist to encourage the development of better emissions curbing practices, such at the Natural Gas STAR program overseen by EPA since 1993. EPA’s own website touts the successes of the program: “Since 1993, the Program's domestic partners have eliminated more than 904 billion cubic feet (Bcf) of methane emissions through the implementation of approximately 150 cost-effective technologies and practices.” These successes in reductions and sequestrations call into question the need for a command and control regime like the one EPA has proposed.

Moreover, through both their proximity to the affected facilities and their intimate knowledge of local resources, state regulators are in a much better position to regulate toxic air emissions than a federal agency. In testimony before the Senate Energy and Natural Resources Committee, Daniel Yergin, a member of the federal government’s Natural Gas Subcommittee of the Secretary of Energy’s Advisory Board, remarked, “there is a tendency to assume that this isn’t going on but it’s been going on for decades. The states are the leader and bring that long experience to it.” He also noted that federal regulation can result in “a kind of super structure on top of a superstructure that would make investment more difficult, would take a much longer time to get things done, and move farther away from communities.” Indeed, because of the highly localized nature of air quality responses and the variances in well locations, the flexibility afforded by allowing states to tailor their own regulations according to their needs can result in the same reductions with better cost-effectiveness.

Modern energy production was pioneered and advanced in the United States, and it is important that our regulatory system help—not harm—our ability to continue producing safe, affordable energy here at home. EPA’s proposed oil and gas emissions rule would impede the ability of industry to make use of the technology that has led to natural gas prices being the lowest in a decade, and imposes unnecessary costs on doing business based on shaky assumptions and vague authority.

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April 24, 2012 12:51 PM

Pipelines Key to Getting Gas to Market

By Don Santa

President, Interstate Natural Gas Association of America

The United States has an unprecedented opportunity to secure the benefits—both economic and environmental—of increased natural gas development, while ensuring that such development is conducted in a prudent and environmentally responsible manner. The Environmental Protection Agency’s decision to exempt pipelines and gas storage facilities from its new air emissions rule was a step in the right direction.

We are glad that the EPA recognized that volatile organic compound (VOC) emissions at pipeline compressor stations and pneumatic controllers are negligible, and therefore exempted such emissions from the rule. Still, we are perplexed with some of the wording in the rule indicating that EPA may revisit the issue. Pipeline systems, including compressors and valves, emit few VOCs because the vast majority of VOCs are removed from natural gas before it enters the downstream pipeline system. The cost and burden to reduce the minimal amount of VOCs attributable to the natural gas transmission and storage sector could threaten development of much-needed pipelin...

The United States has an unprecedented opportunity to secure the benefits—both economic and environmental—of increased natural gas development, while ensuring that such development is conducted in a prudent and environmentally responsible manner. The Environmental Protection Agency’s decision to exempt pipelines and gas storage facilities from its new air emissions rule was a step in the right direction.

We are glad that the EPA recognized that volatile organic compound (VOC) emissions at pipeline compressor stations and pneumatic controllers are negligible, and therefore exempted such emissions from the rule. Still, we are perplexed with some of the wording in the rule indicating that EPA may revisit the issue. Pipeline systems, including compressors and valves, emit few VOCs because the vast majority of VOCs are removed from natural gas before it enters the downstream pipeline system. The cost and burden to reduce the minimal amount of VOCs attributable to the natural gas transmission and storage sector could threaten development of much-needed pipeline and storage infrastructure projects. We do not believe that further investigation by EPA will result in a different conclusion, and we stand ready to help EPA better understand VOC emissions from the midstream industry.

Pipelines provide an indispensable link between production and markets. The American natural gas resource base is far greater than thought a decade ago, thanks largely to innovative uses of existing technologies to develop unconventional gas supplies, like shale gas, coalbed methane and tight gas. Prudent, environmentally responsible development of this unconventional resource base—which accounts for a rapidly increasing portion of natural gas supplies—is transforming the American economy, increasing energy security and improving air quality. Development also is fueling new domestic industrial expansion, creating American jobs, generating tax and other revenue for the local, state and federal government, and benefitting homeowners, businesses and other consumers of natural gas.

Because natural gas is vital to the U.S. economy, it is imperative that the government gets it right when it comes to regulating natural gas. We believe regulators at all levels – federal, state and local – need to balance appropriately the need for increased natural gas supply with concerns over the environment and other issues. We also think they must support public policies that promote the prudent and safe construction and operation of the infrastructure – including pipelines and other midstream facilities—needed to bring natural gas to market.

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April 24, 2012 12:30 PM

Reagan was right: trust but verify

By Tom Wolf

Executive Director, Energy Council Illinois Chamber of Commerce

When trying to find the “sweet spot” for hydraulic fracturing regulations, I’m reminded of a theme Ronald Reagan employed when talking about a subject a tad more important than fracking – “trust but verify.”

Keeping that wise thought in mind, here are some ideas Illinois is working on as we come up with legislation and regulations on fracking in our state:

1) The states know best

Every state’s geology is bit different. Certainly Illinois’ will be different than Western Pennsylvania’s which is different from Colorado’s. States should be given every opportunity to legislate and regulate accordingly. In Illinois legislation on regulating fracking was negotiated by the oil and gas producers, the petroleum council, environmental groups and the farm bureau and is making its way through the State House. The legislation was informed by experiences in other states as well as insights into our state’s geology, DNR and political landscape. Can the Federal go...

When trying to find the “sweet spot” for hydraulic fracturing regulations, I’m reminded of a theme Ronald Reagan employed when talking about a subject a tad more important than fracking – “trust but verify.”

Keeping that wise thought in mind, here are some ideas Illinois is working on as we come up with legislation and regulations on fracking in our state:

1) The states know best

Every state’s geology is bit different. Certainly Illinois’ will be different than Western Pennsylvania’s which is different from Colorado’s. States should be given every opportunity to legislate and regulate accordingly. In Illinois legislation on regulating fracking was negotiated by the oil and gas producers, the petroleum council, environmental groups and the farm bureau and is making its way through the State House. The legislation was informed by experiences in other states as well as insights into our state’s geology, DNR and political landscape. Can the Federal government do that?

2) Transparency on the ingredients, not the recipe

Legislation in Illinois includes language that mandates transparency when it comes to the kinds of chemicals being put in the ground. It does not mandate the release of the exact amounts used. This lets environmental interests and government regulators know what chemicals to look for while still protecting the proprietary rights of the developers. The competitive chef might let you know his ingredients, but you don’t have to know the recipe.

3) Don’t kill the goose before it lays the golden egg

We’re trying to find a legislative and regulatory road map that will allow fracking while protecting landowners and the environment. We only have a few test wells in Illinois at this point and it’s still very unclear if production will ever make sense here. It’s in that light that we’re trying to thwart efforts to put excise or production taxes on a recourse that may or may not be economically viable. That has a way of killing production before it even starts.

As with all new regulations, there is going to be some angst, give and take and way too much guessing and finger pointing. But over time we believe adults can work together to provide a realistic starting point while keeping the theme in mind: trust but verify.

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April 23, 2012 5:32 PM

New Rules for Gas: Good Policy, Delayed

By Ann Weeks

Senior Counsel, Clean Air Task Force

Last week, EPA announced New Source Performance Standards (NSPS) for the oil and natural gas industry. These new rules are an important and long-awaited step towards better control of the air pollution emitted by this rapidly expanding sector.

Notably, the standards include the first federal air pollution regulations for hydraulically fractured (fracked) natural gas wells. That, plus new regulation of other equipment in this industry, represents significant progress in combating air pollution, especially as forecasts project increasing reliance on natural gas for generating electricity. Without these rules, air pollution from new gas wells and equipment would continue to increase; now the industry must begin to clean up nationwide. Once the rule finally goes into full effect, VOC emissions, a precursor of ground-level smog, will be reduced by hundreds of thousands of tons per year; toxic chemicals like benzene will be reduced by 12,000 – 20,000 tons per year. A...

Last week, EPA announced New Source Performance Standards (NSPS) for the oil and natural gas industry. These new rules are an important and long-awaited step towards better control of the air pollution emitted by this rapidly expanding sector.

Notably, the standards include the first federal air pollution regulations for hydraulically fractured (fracked) natural gas wells. That, plus new regulation of other equipment in this industry, represents significant progress in combating air pollution, especially as forecasts project increasing reliance on natural gas for generating electricity. Without these rules, air pollution from new gas wells and equipment would continue to increase; now the industry must begin to clean up nationwide. Once the rule finally goes into full effect, VOC emissions, a precursor of ground-level smog, will be reduced by hundreds of thousands of tons per year; toxic chemicals like benzene will be reduced by 12,000 – 20,000 tons per year. And, as a co-benefit of the pollution control measures needed to achieve the new standards, emissions of methane will be reduced by 1.0 – 1.7 million tons a year. This rule therefore eventually will provide significant air quality and climate benefits.

The bad news is that the rule has some substantial gaps. The worst gap is a two and a half year delay of the requirement to “green-complete” fracked wells – a process that prevents emission of pollutants into the atmosphere. EPA found that green completion is the best system of emissions reduction for these wells – but that it can’t be required until January 2015. This is dismaying because it is unnecessary. The technology for green completions consists of a set of tanks and traps, mounted on trucks, which use gravity to separate the natural gas from fracking fluids and solids. If it sounds simple, that’s because it is. It’s also cheap. Owners of over 1,600 wells have reported costs equaling less than $20,000 per well. That’s before accounting for the revenue generated by selling the natural gas that this technology captures. In fact, green completion actually makes money for natural gas producers. Even with gas prices very low right now, the required equipment rapidly pays for itself, and using it prevents vast amounts of pollution. Green completions are cheap and easy and in several states they’re already required.

So why wait until 2015? Well, the industry made many arguments to delay, and even to eliminate, the green completion requirement. However, CATF and others have demonstrated these arguments are without merit. For example, last fall the American Petroleum Institute (API) – an industry advocacy group – told EPA that only 200 sets of the equipment needed for green completions can be fabricated per year. Did we mention that this is fairly simple equipment? The petroleum industry has deployed vast amounts of equipment in shale gas basins over the past few years – for example, drilling thousands of wells and installing almost a hundred compressor stations in one year in a single state – Pennsylvania. The notion that this industry cannot fabricate more than a few hundred sets of tanks and traps a year is just not credible.

As even API acknowledges, 300 sets of completion equipment exist today. Using their recent figure for the number of wells which require fracking – 25,000 wells a year (up from 20,000 wells per year in their November comments) only 700 more sets of completion equipment are needed, since a single set can be used on 25 wells per year. EPA’s final estimate is that almost 13,000 gas wells are fracked a year, so by that figure, only 220 new sets are needed. Either way, a one-year delay would have been very sufficient for the gas industry to obtain the required equipment, which pays for itself, and enables the capture of serious air pollution. This industry does not lack for financial resources. As such, it is CATF’s position that the 2.5-year delay is simply not justified on the facts.

Now, EPA did not leave fracked wells entirely unregulated during the delay period – and that is a good thing, as vented wells are astoundingly dirty. In the interim, EPA has required the gas producers to flare, or burn off, the waste natural gas at fracked wells. But the final rule fails to impose any limits or requirements on the practice to ensure that flares burn cleanly to reduce emissions. To be sure, flares will eliminate a lot of methane emissions and reduce certain VOCs. But it will replace those emissions with carbon dioxide, smoke and other deadly particulates, NOx, and other unhealthful air pollutants. Clearly, flaring does not eliminate the air pollution problems experienced by people living nearby who already suffer from the impacts of drilling. It is not adequate, much less state of the art pollution control, as EPA recognized when basing the standard on the use of green completion techniques.

What’s more, EPA also determined that other sources in the industry, like conventional gas wells, oil wells, and existing natural gas equipment, will remain unregulated. For example, EPA has given the whole transmission and storage segment of the natural gas industry a hall pass. These are the interstate pipelines that move natural gas around the country. Again, this weakening from the proposed rule responded to industry arguments – they claimed that air pollution from pipelines and storage facilities is too diluted (with methane!) to be regulated. The additional reductions in VOC and methane that would have resulted from regulating that part of the industry would have come at only modest costs. It is unfortunate that natural gas transmission and storage, which emits over 2 million tons of methane and 65,000 tons of VOC a year, will not be covered at all under these rules.

We’ll probably be hearing a lot about the costs of this rule. The costs of the rule are very low – in many cases, like green completions, the required measures conserve gas for sale which can offset the cost of the measure completely or in part. Nevertheless, industry has claimed very high costs – based on incorrect arguments. For example, API has used the wildly inflated figure of $180,000 per green completion, which they got by arguing that each set of equipment would need to be rented for 30 days per well. But no producer has ever reported actual costs even approaching that number. Moreover, API’s estimate is based on the unreasonable idea that equipment must be separately rented for at least 30 days for each separate well, despite the fact that gas producers are drilling multiple wells on single pads that all can be completed one after the other. Well completion takes about a week, so there is no need to rent equipment for 30 days per well. API’s figure is based on that flawed assumption (and others) and is too high.

In short, EPA's new oil and gas rule is a big improvement over the status quo but is weaker than current technology and economics allow. We will be working to defend the standards against further attacks (rhetorical and otherwise) based on the inconsistent and inaccurate claims that we have seen already. CATF also intends to continue working with EPA, states, industry partners, and our NGO partners to achieve further emissions reductions from the oil and gas industry. Few other sources of air and climate pollution can be cleaned up as rapidly and cheaply as this one, and that’s where our focus will remain.

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April 23, 2012 2:55 PM

Unjustified EPA Intrusion Into Fracking

By William O'Keefe

CEO, George C. Marshall Institute

Reactions to EPA’s newly released fracking rules from the environmental community—at least, by some—have been sullen but not mutinous. And industry generally seems satisfied with the time allotted for compliance but concerned with cost. Both of these responses suggest that, for once, EPA got it right. But that could be a rush to judgment. Here are some reasons why.

Reports indicate states are sufficiently managing regulation of natural gas production within their borders. That being the case, what is the problem to be solved that justifies federal regulation? If there is not an adequate answer to that then EPA’s action, even if reasonable, is not justified.

This proposal is not a once and for all action. It is just the first step in regulating fracking. Is there reason to believe that the next steps will also be moderate? The track record of this EPA suggests otherwise. If the agency had come forward with a regulation that was patterned with other Clean Air Act regulations that it has issued, it would have been a serious blow to America&rsquo...

Reactions to EPA’s newly released fracking rules from the environmental community—at least, by some—have been sullen but not mutinous. And industry generally seems satisfied with the time allotted for compliance but concerned with cost. Both of these responses suggest that, for once, EPA got it right. But that could be a rush to judgment. Here are some reasons why.

Reports indicate states are sufficiently managing regulation of natural gas production within their borders. That being the case, what is the problem to be solved that justifies federal regulation? If there is not an adequate answer to that then EPA’s action, even if reasonable, is not justified.

This proposal is not a once and for all action. It is just the first step in regulating fracking. Is there reason to believe that the next steps will also be moderate? The track record of this EPA suggests otherwise. If the agency had come forward with a regulation that was patterned with other Clean Air Act regulations that it has issued, it would have been a serious blow to America’s natural gas industry. Such a proposal would have caused a major political backlash in an election year and could have set back the dash to gas.

The invisible hand of politics may have been at work to snatch control from states without causing a backlash. Cynicism is not always unjustified.

Some parts of the regulation simply codify current best practices from industry and states. So why was it necessary to issue a federal regulation to mandate what is already being done? In addition to setting standards for emissions, the agency claims that the regulatory requirements will save some producers money. The notion that a federal agency has a stronger incentive than a business to save its own money just doesn’t pass the “red face” test. Producers have an incentive to reduce methane emissions because they affect the quantity of gas produced.

Centralization of fracking is premature and potentially counterproductive. States where shale gas is being developed are adopting regulatory approaches that meet their specific circumstances. They’re acting responsibly, as evidenced by EPA adopting some of their best practices. State regulations represent experiments that produce useful information for finding the most cost-effective approaches to developing shale gas resources and protecting the environment. The future value derived by continuing to allow states to handle the natural gas regulation could now be lost. Furthermore, states already have to comply with existing air quality standards and should have the freedom to figure out the best way of doing that without the Federal Government micromanaging compliance.

While most comments by oil and gas companies on the rule were positive, the sector should be concerned about the history of regulations under the Clean Air Act. There is a long track record of environmental groups suing the agency which then enters into settlement agreements that result in more stringent regulations. Regulations are supposed to be issued under the Administrative Practices Act with public comment, not through litigation

Given the tremendous environmental progress that has been made over the past four decades, we have reached a point where it makes sense to begin moving environmental regulatory authority back to the states. Yet, the Obama Administration continues to reaffirm a commitment to command and control over federalism.

Even if most of these concerns turn out to be unjustified, EPA—in this new regulation—has set another precedent for extending its control over greenhouse gases. Since the Administration subscribes to the climate orthodoxy that using fossil energy for operating businesses, homes, and travel is leading to a climate apocalypse, which gets weaker every day, there is no logical stopping point for EPA’s reach and regulatory stringency.

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April 23, 2012 12:47 PM

States Already Provide Balance

By Kathleen Sgamma

Vice President of Government & Public Affairs, Western Energy Alliance

The idea that the federal government does a better job protecting the environment than the states is a false premise. A far removed federal bureaucracy unfamiliar with local conditions and needs is rarely the best entity to ensure environmental needs are balanced with economic growth and job creation. Historical context and a basic understand of global economics shows the viability of such a balance, as wealthy societies are those best positioned to ensure environmental protection.

The natural gas industry is already heavily regulated at every level of government. In addition, companies go above and beyond legal requirements to reduce emissions and protect air quality, and states already are effectively regulating air emissions. In fact, the recent oil and natural gas sector rules announced last week by the EPA largely follow what states and companies are already doing to reduce emissions and capture methane. However, now companies will have to spend a lot of time and money proving to EPA that they’re doing something they’ve already been doing.

T...

The idea that the federal government does a better job protecting the environment than the states is a false premise. A far removed federal bureaucracy unfamiliar with local conditions and needs is rarely the best entity to ensure environmental needs are balanced with economic growth and job creation. Historical context and a basic understand of global economics shows the viability of such a balance, as wealthy societies are those best positioned to ensure environmental protection.

The natural gas industry is already heavily regulated at every level of government. In addition, companies go above and beyond legal requirements to reduce emissions and protect air quality, and states already are effectively regulating air emissions. In fact, the recent oil and natural gas sector rules announced last week by the EPA largely follow what states and companies are already doing to reduce emissions and capture methane. However, now companies will have to spend a lot of time and money proving to EPA that they’re doing something they’ve already been doing.

The complexity of natural gas operations and the differences across states, producing basins and fields means that emissions profiles vary widely and a one-size-fits-all-approach is ineffective and even counterproductive. That’s why Western Energy Alliance has been working with the Western Regional Air Partnership (WRAP) to develop a state-by-state, basin-by-basin air emissions inventory to provide regulators with the information necessary to target specific issues in a way that provides the most environmental benefit for the cost.

EPA’s recent rules do the opposite – they impose large costs without commensurate environmental benefit. Only EPA could claim with a straight face that a rule is cost effective when their own analysis found $745 million in annual costs and only $11-19 million in environmental benefit. In fact, although the rule is supposed to regulate Volatile Organic Compounds (VOC) and hazardous air pollutants (HAP), EPA could not quantify the benefits of either. EPA skipped basic scientific steps required to support the VOC controls, and even showed that HAPs are already within the acceptable risk levels. The environmental benefits are exclusively from methane capture, a greenhouse gas which is neither a criteria pollutant nor a HAP. So in effect the rule is really about regulating greenhouse gas emissions without properly making the case for doing so.

The right balance can be met by less prescriptive federal regulations and more support for the states. Rather than the federal government usurping state authority, the federal government should take advantage of state regulators’ expertise and local experience that the federal government can’t match. The impending Bureau of Land Management (BLM) hydraulic fracturing (fracing) regulations are a perfect example. States already require permits for wells on federal land to ensure wellbore integrity and water protection, so why add another layer of redundant permitting by the federal government at a time when its budget and personnel resources are decreasing?

Western Energy Alliance calls on the federal government to slow down on new regulation and expend more effort collaboratively supporting and funding state regulators. Such a common sense approach would better protect the environment while enabling our economy to grow.

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April 23, 2012 6:19 AM

Governments Intervening Reactively

By Scott Sklar

President, The Stella Group, Ltd & Adjunct Professor GWU

As natural gas fracking has boomed, federal, state and local governments have been forced to intervene in a reactive mode. Aside from activities on federal lands, the only role of the federal government should be involved is in environmental analysis and regulation for air and water quality, and impacts on geology (earthquakes and tremors). Since the environmental and geological impacts do cross state borders, federal involvement is required to insure public health "now and in the future" is not impinged by this activity. The public needs transparency so they can be assured of their safety and health. For State governments, they need to establish liability benchmarks, so that natural gas fracking and extraction sites which create unintended problems are borne by the industries and not by the taxpayers. For local governments, they need to address siting issues which is their domain - both existing and future - to insure sites don't become brownfields or toxic fields of the future and harm economic growth. Local governments must be involved in insuring long term water a...

As natural gas fracking has boomed, federal, state and local governments have been forced to intervene in a reactive mode. Aside from activities on federal lands, the only role of the federal government should be involved is in environmental analysis and regulation for air and water quality, and impacts on geology (earthquakes and tremors). Since the environmental and geological impacts do cross state borders, federal involvement is required to insure public health "now and in the future" is not impinged by this activity. The public needs transparency so they can be assured of their safety and health. For State governments, they need to establish liability benchmarks, so that natural gas fracking and extraction sites which create unintended problems are borne by the industries and not by the taxpayers. For local governments, they need to address siting issues which is their domain - both existing and future - to insure sites don't become brownfields or toxic fields of the future and harm economic growth. Local governments must be involved in insuring long term water accessibility since fracking is extremely water intense and availability of water is becoming a major issue across the United States, no longer just relegated to the Southwest. The federal government should allow and encourage our national laboratories under the Departments of Agriculture and Energy and the Environmental Protection Agency to actively assist State and local governments in analysis so as to assist these governments with these responsibilities.

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