INSIGHT: US industries blast new EPA rule on fracking

19 April 2012 16:27  [Source: ICIS news]

By Joe Kamalick

WASHINGTON (ICIS)--US energy industry and manufacturing leaders charge that the White House has launched yet another regulatory barrage in what they regard as the Obama administration’s war on fossil energy resources and development.

The move by the Environmental Protection Agency (EPA) to impose the first-ever air emissions restrictions on US natural gas production, industry officials warn, could well undermine the nation’s energy security, the broader economy and employment growth.

The EPA on Wednesday issued a final rule under the Clean Air Act (CAA) to require natural gas producers to eliminate wellhead emissions of volatile organic compounds (VOCs), other toxics such as benzene and hexane, and methane.

The new rule, first proposed in July 2011 to strong industry objection, is aimed at reducing or eliminating emissions from natural gas wells developed using hydraulic fracturing (“fracking”).

EPA said that fracked gas wells are a particular source of toxic emissions and vented methane when the wells are being completed and prepared for long-term production.

In a stage of well completion known as “flowback”, EPA said, large volumes of fracking fluids, water and natural gas flow at high velocity to the surface and escape into the environment for as long as three to ten days before the well is tied into a transportation pipeline link.

The agency said that its nearly 600-page regulation targeting emissions from fracked gas wells “will reduce 95% of the harmful emissions from these wells that contribute to smog and lead to health impacts”.

EPA said that industry compliance with the new emissions restrictions will be required by 1 January 2015. 

In the meantime, EPA said it will require that gas production companies use flaring to burn off emissions until wellhead equipment can be installed to capture the pollutants and natural gas that otherwise would escape into the atmosphere.

The agency said that the equipment needed to block wellhead emissions is already in use on about half of the some 12,000 fracked gas wells being developed each year, and that the “green completion” technology is available and cost effective.

The equipment for a green completion typically includes a sand separator, which filters fracking sand from the flowback, leaving water and natural gas. A second piece of gear separates water from the gas flow. The recovered sand and water are diverted to a disposal tank, and the natgas is sent on via pipeline to a processing facility and ultimately into the nation’s gas energy grid.

EPA said that its natural gas wellhead emissions rule will actually pay for itself because the installation of green completion equipment will allow producers to capture and sell natgas that otherwise would be lost to the atmosphere. The agency said that once the rule is fully implemented in 2015, it could save the natural gas industry as much as $19m (€14.4m) annually thereafter.

The rule is being phased in over the next two years, EPA said, in order to give manufacturers time to ramp-up production of the green completion equipment and for gas producers to acquire and install the gear and train personnel in its use.

However, the EPA rule was quickly and broadly condemned by manufacturers and many in the energy sector.

The Institute for Energy Research (IER), an energy industry think-tank, charged that the new EPA rules on fracking emissions are part of the Obama administration’s opposition to fossil energy resources and development.

“Once again, the Obama administration is using the EPA to execute its war on affordable energy,” said IER president Thomas Pyle.

“Today’s announced rule will increase the regulatory burden on natural gas producers,” he said, adding that the agency’s claim that the regulation will actually save producers money “is disingenuous and fraudulent”.

The National Association of Manufacturers (NAM) also criticised the fracking emissions rule as detrimental to US energy production and pricing and to industry and employment growth.

“Here we go again with another economically damaging regulation from the administration,” said NAM president Jay Timmons.

“These new costly regulations on energy producers hurt manufacturers’ competitiveness and delay job creation,” he said.

“Most unfortunate is that these new rules will only increase energy prices in the long run,” Timmons said, adding: “These regulations will hamper our ability to develop much-needed US energy supplies.”

US petrochemical producers, downstream chemical makers and a broad range of manufacturers have hailed the development of shale gas – which can only be produced with hydraulic fracturing – as giving domestic US industry a rebirth. They are worried that over-regulation could choke off their newfound shale gas energy and feedstock riches.

The American Petroleum Institute (API), the principal trade group representing oil and natural gas producers, said that EPA had included some of its recommended changes, put forward last year when the rule was first proposed.

But API, which earlier has charged that the Obama administration was trying to smother shale gas development, said it would reserve judgement on the new fracking rules until the large rulemaking document, its requirements and consequences, can be fully analyzed.

Similarly, America’s Natural Gas Alliance (ANGA) said that it welcomed some of the changes EPA made in the proposed rule.  But ANGA, which represents 30 major natgas exploration and production firms, also said it would reserve judgement until it could wade through the huge rulemaking.

The Independent Petroleum Association of America (IPAA), representing thousands of independent exploration and production firms as well as supporting service and supply companies, charged that EPA had grossly exaggerated emissions released during the well completion process and that the resulting rule is grossly disproportionate to the problem.

As a consequence, said IPAA president Barry Russell, the EPA action could have profound impact on oil and gas producers “as well as our economy and our national security”.

The Western Energy Alliance (WEA), representing some 400 exploration and development companies in US western states, accused EPA of crafting a rule that is “fundamentally flawed” and whose costs will far outweigh its minimal environmental impact.

WEA’s vice president for government affairs, Kathleen Sgamma, also challenged the agency’s claim that the new rule would pay for itself and save producers money.

“Only a federal agency far removed from real-world economics and on-the-ground conditions could say with a straight face that a regulation is cost effective when it has $745m in costs and only $11-19m in benefits,” she said.

She charged that with the new rulemaking, EPA and the Obama administration were continuing their campaign to circumvent Congress to impose global warming-related restrictions that Congress had refused to legislate.

Sgamma said the rule could make exploration and development in remote western areas cost-prohibitive.

Several House Republicans agreed, arguing that, in the words of Energy and Commerce Committee member John Sullivan of Oklahoma, “the administration preaches an ‘all of the above’ energy policy but has practised a ‘nothing from below’ approach”.

Energy and Commerce Committee chairman Fred Upton (Michigan) said that “This rule is another example of EPA expanding its role in national energy policy”.

“The administration continues to layer regulation after regulation that will drive electricity and fuel prices even higher”, he said, and “stifle job creation and industry growth”.

 ($1 = €0.76)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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