US must regulate fracking without killing energy renaissance

24 February 2014 21:28  [Source: ICIS news]

ARLINGTON, Virginia (ICIS)--US energy producers, downstream industries, environmentalists and regulators face a major challenge in regulating newly abundant shale gas without destroying the manufacturing renaissance it created, economists said on Monday.

John Caldwell, director of economics at the Edison Electric Institute, told a meeting of business economists that “the euphoria surrounding shale gas development is well founded”.

He said that some $87.5bn in new domestic US industrial development can be credited to the shale gas development, “and that is expected to double by the end of this decade and double again by 2035, with the creation of some 3.5m jobs by that time”.

Speaking at the annual meeting of the National Association for Business Economics (NABE), Caldwell said that “The fact is that this economic boom is good for everyone, but the bad news is that there are concerns about the shale process itself”.

“This is the fundamental question,” he said. “Shale gas has changed the economic equation, but it is relatively new and involves some environmental risk.”

“The question is, what needs to be done to regulate the process without destroying the renaissance,” Caldwell said.

Mark Brownstein, chief counsel for US energy and climate issues at the Environmental Defense Fund (EDF), said that the fracking revolution has raised three main concerns: the risk to public health, the risk to the environment and the role of natural gas in the US energy profile going forward.

Sharing a panel discussion with Caldwell, Brownstein said he worries that natgas may only be a bridge fuel to a time when the US will shift to a carbon-free or nearly carbon-free energy environment. But in the meantime cheap and abundant supplies of shale gas could delay momentum toward that goal by decades.

Alan Krupnick, senior fellow with Resources for the Future (RFF), said that the challenge is “to build public trust in both government regulation and in the shale process itself”.

Krupnick argued that trust in both the energy industry and government has been badly eroded.

“The fact is, the industry has done a poor job of messaging,” Krupnick said. “The bottom line is that industry does a pretty poor job of messaging compared with the environmental community.”

He said that with US natgas prices at around $4/MMBtu, “something like 200,000 wells could be economically developed in the Marcellus play, where now there are already about 9,000 wells that have been drilled”.

“This development represents tremendous resources but also potentially large impact on communities in the region,” he said, citing a range of environmental studies that suggest risks to drinking water, surface water, quality of life and other challenges.

Whether all those studies and analyses are correct may be beside the point, he said, “because the public perception, even where shale gas development is widely supported, is that there is risk”.

Speaking for America’s Natural Gas Alliance (ANGA), Erica Bowman conceded that the energy industry “has not done a great job in communications, in getting the community to trust them”.

That said, she added, energy industry groups at the state level have taken major steps to improve their environmental performance and community relations.

But she cautioned against rash regulatory action. “We are now in a transition from energy scarcity to energy abundance, and we are just at the beginning of that abundance”.

“In a lot of ways, both industry and regulators are just beginning to learn about where we are today, let alone where the US energy picture will be in five or ten years,” she said.

Jeanne Briksin, chief coordinator for fracking research by the Environmental Protection Agency (EPA), said the nearly two-year-old EPA study of the various impacts of fracking is looking at effects on drinking water supplies, flowback water treatment and disposal, chemicals mixing and the toxicity of chemicals used.

She said the EPA’s final report on the matter is likely by December this year.

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

By: Joe Kamalick
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