Friday, April 20, 2012

New Federal Emission Caps on Fracking: To Be or Not to Be?

The Environmental Protection Agency’s (EPA) new cap on emissions in drilling natural gas this week is the first federal ruling to tackle air pollution tied to hydraulic fracturing.  According to EPA, the new standards would reduce the release of toxic and carcinogenic chemicals such as benzene, hexane and methane.  Natural gas producers would have two years to comply with the new standards.  Although the American Petroleum Institute (API), which represents 500 oil and gas companies, argued that the new standards would slow down the production of domestic natural gas and cost hundreds of millions of dollars, some gas drillers did not think the costs would slow down the gas boom in the U.S.   Gas producers, such as Southwestern Energy Co. and Devon Energy Corporation, stressed that they already have technology in place to capture fugitive methane, an important greenhouse gas. 

Pollution related to drilling natural gas does remain a source of concern.  For example, emissions from gas wells in Wyoming attributed to the increase in ozone levels to the degree that the government may need to “declare parts of the state as an ozone non-attainment area.”  But drilling for gas has not been delayed in Wyoming or Colorado, “where technology to capture emissions has been required by state since 2009 and 2010.”  Development of shale gas in Arkansas’ Fayetteville Shale by Southwestern has been also relatively successful due to cutting costs of emission capturing from $20,000 per well to zero.

While EPA’s new environmental measure is a step towards improving environmental standards of the booming shale gas industry in the U.S., there is a potential for over-regulation of the industry or duplication of efforts already undertaken by the industry to control emissions.  Shale gas has completely transformed the U.S. energy landscape, making the country self-sufficient in natural gas.  The low cost natural gas is reviving the manufacturing and chemical industries in the U.S., shifting the heavily coal-based utility sector to gas, and bringing down the prices of heating and electricity to consumers.  Regulatory slowdown of the industry would have unintended consequences to the economy. 

At this point, addressing casing and cementing of shale gas wells as well as usage and treatment of the flowback water appear to be the most important environmental challenges facing the industry.  But before slapping a one-size fits all regulation to appease environmental groups, it is also crucial to look at functioning state regulations that already exist as well as voluntary self-regulation practiced by some gas producers to avoid major accidents.

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