The hydraulic fracturing technology that opened vast US natural gas shale resources could be snared in what one analyst calls “a regulatory race to the top.”
The industry is arguing that regulation of hydraulic fracturing should stay at the state level, where it is traditionally managed. Environmentalists disagree, saying the states’ record is spotty and tougher federal standards are needed. The Environmental Protection Agency is studying the issues, and aims for proposed rules in 2014.
Now some analysts are warning states could actually become stricter than the EPA as they seek to forestall a federal takeover.
Kevin Book of ClearView Energy Partners says “pre-emptive” state regulation is a “primary” supply-side risk because it will stay in place even if Republicans win control of the White House and Senate and stop the EPA study.
Christine Tezak, senior energy and environment policy analyst with Robert W. Baird & Co., says states are “the front line” of fracking regulation and are moving faster than EPA, driven also by popular worries about the technology.
State Bans Pile Up
New Jersey just banned fracking for a year, in a compromise with Republican Gov. Chris Christie who vetoed a permanent ban, even though no one is currently proposing fracking activity in the state.
New York is weighing public comments to shape regulations that could end a three-year fracking moratorium, with officials already promising the strictest standards in the nation.
West Virginia, home to King Coal, is another harbinger. Coal companies own much of the state’s subsurface mineral rights to the huge Marcellus Shale that goes under the state. But at the end of 2011, the legislature in special session passed comprehensive fracking regulation, which some lawmakers already want to make tougher. The new law sets permit fees at $10,000 for the first well and $5,000 for subsequent ones on multiple-well pads.
The law sets new rules for setbacks from homes and barns, reimbursement to landowners for damage, and repairs for roads damaged by drilling heavy equipment.
In addition, drillers must disclose all fracking fluids to West Virginia regulators. Federal regulators are expected to issue a final rule requiring disclosure in the next month or two. But West Virginia joins 10 other states – most recently Texas and Colorado – in requiring the disclosure ahead of any federal action.
Completing In Green
EPA may also require “green completions,” for which drillers must install special equipment to capture volatile organic compounds (VOCs), methane, and fracking fluids returning up the well bore after fracking.
The methane, which is natural gas, can be sold to offset the cost, and EPA thinks the process can be profitable. The industry says that’s only if the well is productive, and not all wells are.
But EPA is following the lead of two states on green completions – Wyoming and Colorado, both states with major oil and gas industries.
The latest controversy to hit fracking involves disposal of wastewater from fracked wells by deep underground injection. The process has been used for decades in places like Texas and Oklahoma to get rid of contaminated water from all kinds of drilling.
A series of tremors around Youngstown, Ohio is being attributed by earthquake experts to wastewater injection nearby. In Arkansas, Canada and England, similar small quakes have been linked to injections into what turned out to be underground faults.
That linkage is disputed by Ohio’s governor, among others, but it has halted permits for new disposal wells for fracking waste from Pennsylvania.
That adds another potential regulatory layer for Pennsylvania regulators. Managing flowback water from burgeoning fracking there has been the state’s chief environmental issue. That water picks up toxic elements deep underground that have overwhelmed conventional wastewater treatment plants. Some drillers are developing recycling technology.
Pennsylvania legislators are debating several bills to tighten regulations, adding fees that could add up to $360,000 to a well’s 50-year lifetime cost.
Nationwide, says Book, new regulations on flowback management and green completions alone could add 33 to 75 cents per thousand cubic feet produced to the cost of a well. While drillers have drastically lowered fracking costs, the new rules will make a difference in today’s wholesale market, where that gas is selling for $2.50-$3.00.
Photo Caption: A Department of Interior hearing on natural gas hydraulic fracturing on public lands.