States, oil producers see regulatory problems on the horizon

Excessive and poorly conceived federal regulations threaten to stifle an onshore US oil and gas renaissance that is being made possible by hydraulic fracturing and other new technologies, state officials and producers told the US House Oversight and Government Reform Committee. States are better qualified and have worked with producers and other stakeholders to develop rules that are effective and economic, they said at field hearings July 13 in Edmond, Okla., and July 14 in Fargo, ND.

State regulators have repeatedly shown that they can move faster than a federal bureaucracy, noted Patrice Douglas, an Oklahoma Corporate Commission member, during the July 13 hearing.

Douglas noted that in the 2 years that the US Environmental Protection Agency spent studying hydraulic fracturing, the State Review of Oil and Natural Gas Environmental Regulations Inc. (Stronger)—comprised of state regulators, environmental groups, and oil and gas producers—completed reviews of five states’ fracing regulations and made recommendations that states, including Oklahoma, have implemented.

“This is not meant to suggest that Oklahoma and other states are perfect. We are not,” Douglas added. “We have worked, and will continue to work, in a positive way with EPA and other federal agencies on matters of mutual interest in which we can share our collective expertise. We seek ways to improve.”

While the federal permitting process may make sense where large blocks of land are managed for federal ownership or trust responsibilities, federal mineral tracts in North Dakota outside Fort Berthold and the Dakota Prairie Grasslands are small parcels that resulted from right of way acquisitions and bankruptcies, according to Lynn D. Helms, director of the state’s Department of Mineral Resources.

Burdens and delays

In nearly every case, the surface estate has been sold, resulting in a split estate situation where the processes required to obtain a federal permit impose regulatory burdens and development delays on private property owners, he indicated during the committee’s July 14 hearing in Fargo.

“North Dakota has worked hard to create a stable tax and regulatory environment that promotes venture capital investment,” Helms said in his written statement. “Our oil and gas rules are reviewed at least every 2 years through a public comment process where every comment must be considered in writing. This ensures that North Dakota regulations keep up with new technologies and economic conditions.”

He said North Dakota’s Industrial Commission believes states that have adopted fracing rules that include chemical disclosure, well construction, and wellbore pressure testing should be exempt from proposed US Bureau of Land Management rules and EPA guidance. “The EPA guidance is written for enhanced oil recovery wells or disposal wells completed with tubing and packer,” Helms told the committee. “Most of the requirements will not work mechanically on wells completed with swell packers and fractured down the production casing as is common in North Dakota.”

Henry A. True, vice-president of Bridger Pipeline LLC and Belle Fourche Pipeline Co., said Bakken shale production growth has increased North Dakota’s crude oil production in 10 years to more than 640,000 b/d from 84,000 b/d. “North Dakota is now second to Texas in daily oil production,” he said in his written testimony. “However, when you compare infrastructure, Texas has over 50,000 miles of liquids pipelines, while North Dakota has less than 4,000 miles. Our estimates show that North Dakota production could reach 1.2 million b/d in the next decade, but there is a clear and significant infrastructure gap that needs to be solved.”

Jack R. Ekstrom, vice-president of corporate and government relations at Whiting Petroleum Corp. in Denver, said at the July 14 hearing that it was fortunate that much of the Bakken shale formation is in North Dakota, where individuals hold most of the surface and mineral rights and the state and federal governments have minor ownership. “Many in government are not aware that a federal drilling permit is required even when the federal government owns none of the surface and a minute fractional interest in the subsurface minerals,” he said in his written testimony.

Avoiding federal lands

Ekstrom added that the specter of more federal regulations, coupled with the US Department of the Interior’s “disingenuous and deceptive statements over many months related to so-called ‘unused’ leases” have led Whiting and many other producers to make federal acreage their last development choice. “Our strategy is to lease private lands and state lands, while avoiding federal lands and related costs and delays if at all possible,” he said.

“This industry, along with the associated jobs and energy from the fossil fuel it produces, is critical not just to Oklahoma but to the nation,” said Brian Woodard, vice-president of regulatory affairs at the Oklahoma Independent Petroleum Association, at the July 13 hearing.

“However, as I sit before you today and tout America’s current oil and gas renaissance, and as the blueprint has been laid for a true era of US energy independence, the current administration has countered with an equivalent flood of regulatory policies which threaten to undermine this bright energy future,” he continued in his written testimony.

He said instead of generating estimates from reports that producers submit already, EPA has imposed greenhouse gas reporting requirements on larger upstream independents that cost millions of dollars and make many companies integrate production software and new monitoring equipment into their daily operating systems.

EPA’s proposed new source performance standard for producers inappropriately uses methane as a surrogate for volatile organic compounds, Woodard continued. “In order to be cost effective, the rule should only apply to production streams which contain a meaningful VOC concentration,” he said. “For sources with significantly low to zero VOC content, such as dry gas shales like the Barnett, Haynesville, and others, the cost per ton of emission reductions drastically exceeds historically acceptable levels.”

Inappropriate data

EPA also developed an emission factor for well completions by improperly using Natural Gas STAR data, added Joe Leonard, Devon Energy Corp.’s environmental, health, and safety engineer. “In short, EPA assumes that gas recovered would have otherwise been flared or vented,” he told the committee at the July 13 hearing. “However, industry data shows that reduced emission completions account for significantly more gas produced and sold than would be flared or vented during older and less common completion processes.”

He noted that a recent study that the American Petroleum Institute and America’s Natural Gas Alliance jointly commissioned demonstrated that EPA’s estimates were too high across upstream processes (OGJ, July 2, 2012, p. 52).

“This is outrageous because EPA, using incorrect assumptions, applying inappropriate data, and then analyzing it improperly, has not only changed its emission estimates for completion operations on a forward-looking basis, but revised all oil and gas completion estimates back to 1990—a period before the combined use of horizontal drilling and hydraulic fracturing,” Leonard said in his written testimony.

Fossil fuel opponents also have tactically used the Endangered Species Act to slow down energy resource development, noted Mike McDonald, president of Triad Energy Inc. in Oklahoma City. He said that typically, they overwhelm the US Fish and Wildlife Service with hundreds of proposed candidate listings so the DOI agency can’t respond before mandated deadlines, then sue FWS which settles actions without examining the scientific evidence.

“Of the 1,391 animal and plant species listed, only 20 have ever been removed from the list,” McDonald said in his written testimony. “Several listed and candidate species, in particular the listed American Burying Beetle and the Lesser Prairie Chicken, affect drilling operations in Oklahoma. To protect the beetle, producers must hire consultants, who must put out survey traps containing carrion, file additional paperwork with FWS, and slow drilling operations during the beetles’ active period.”

Contact Nick Snow at

Related Articles

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

Keyera to take majority interest in Alberta gas plant

12/12/2014 Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta.

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits


US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts

On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.



Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected