US lab lists policies capping gas supply

Jan. 25, 2005
A national laboratory managed by the US Department of Energy has identified 40 environmental policy and regulatory constraints on the supply of natural gas.

By OGJ editors

HOUSTON, Jan. 24 -- A national laboratory managed by the US Department of Energy has identified 40 environmental policy and regulatory constraints on the supply of natural gas.

In a study released Jan. 24 by the House Committee on Resources, Argonne National Laboratory (ANL) says regulations limit gas supply by restricting access to gas resources, delaying exploration and production (E&P) or transportation, or increasing costs.

Also on Jan. 24, the Senate Committee on Energy and Natural Resources opened its conference on natural gas.

The ANL study builds on the 1999 report on natural gas by the National Petroleum Council and on the national energy policy proposed in 2001. It includes data gathered from subsequent NPC studies and state and government agencies during 2001-03.

Where possible, the ANL study links resource estimates with the constraints it identifies. Because resource estimates include undiscovered volumes and don't consider economics or technology, they are only rough gauges for potential supply.

ANL points out that some US gas resources are subject to more than one constraint, so its estimates can't be added together without double counting.

Access limits
Regulatory constraints to US gas supply that ANL characterizes as "issues likely to limit access," with estimates of affected resource volumes in parentheses where available, include:

-- Coastal Zone Management Act (CZMA) consistency provisions (362.2 tcf). The provisions enable states to delay federal leasing or block activities on federal leases as not compliant with coastal management programs established under the CZMA.

-- Endangered Species Act. Court decisions have expanded the scope of the law, which can limit resource access and delay permitting. Also, the Fish and Wildlife Service often treats sensitive species as requiring the same or similar protections as endangered or threatened species.

-- Forest Service (FS) restrictions (10-30 tcf). ANL cites decisions by the FS that limit access to and production of gas in three national forests.

-- Outdated Bureau of Land Management (BLM) land use plans (120.3 tcf). "Many" land-use plans don't consider the natural gas potential of affected lands and should be updated, ANL says.

-- Lease stipulations (108 tcf). In some areas technically open for development, stipulations attached to federal leases by BLM and FS have the effect of preventing development "without providing obvious commensurate environmental benefits." ANL cites a 2001 Energy Information Administration estimate that federal lease stipulations increase development costs by 6% and add 2 years to development schedules.

-- Monument designations (1 tcf). During 1996-2001, the administration of former President Bill Clinton used the Antiquities Act of 1906 to designate 19 new national monuments and expand three others. The actions, which make land off-limits to development, affected about 5.6 million acres of federal land, "much of which may contain natural gas resources."

-- Outer Continental Shelf moratoria in the Atlantic Ocean (28 tcf).

-- OCS moratoria in the Eastern Gulf of Mexico (11.3 tcf).

-- OCS moratoria of areas off the West Coast (18.9 tcf).

-- Permit restrictions (86.6 tcf). Imposed at federal, state, or agency-office levels, restrictions in drilling permits "may be so severe that access is effectively prohibited."

-- Bans on Great Lakes drilling (1.1 tcf). Recent state and federal drilling bans have effectively halted E&P.

-- Roadless rule (11 tcf). A 2001 rule by the FS prohibits road construction in inventoried roadless areas, which cover 58.5 million acres, about one third of the National Forest System.

-- Wilderness areas (9 tcf). Of about 26.5 million acres identified as wilderness study areas in an inventory required by federal law and submitted to Congress in 1991, decisions haven't been made on 16.3 million acres. The land is treated as off-limits wilderness while in this status.

-- Ocean policy. The Oceans Act of 2000 established the US Commission on Ocean Policy to propose to the president a comprehensive national policy for oceans and coastal areas. Draft recommendations include assessment of ocean and coastal resources. "It is too early to estimate the impacts of such broad recommendations and their implementation on offshore natural gas exploration, production, and development," ANL says.

Delaying operations
Policies and regulations that ANL says limit gas supplies by delaying E&P or transportation work, with resource estimates, include:

-- Coalbed-methane produced-water management (74 tcf). Regulations being written for water produced during coalbed-methane operations might be costly, create delays, and reduce production.

-- Drilling permits (311.2 tcf). In the Rocky Mountain region, backlogs are growing for permits to drill and rights of way. Many resource management plans are out of date and require revisions before leasing or development can occur. The revisions can trigger the need for new, time-consuming environmental assessments. Agencies aren't staffed to handle the surge in permit applications following recent increases in gas prices. Citizens' lawsuits aggravate permitting delays, which especially hinder coalbed-methane activity.

-- Essential fish habitat (174.5 tcf). Regulations issued in 2002 include requirements duplicating those of other federal agencies. The duplications can delay leasing and permitting decisions.

-- Fracturing operations (293 tcf). Increased regulation of hydraulic fracturing, as sought by environmental groups, would delay gas production or make it uneconomic.

-- Nationwide permits. Regulatory changes have limited activities covered by the nationwide permits that the US Army Corps of Engineers adopted to streamline permitting under the Clean Water Act. The changes mean that more gas-related activities will require individual permits, which can take more than 1 year to secure. In addition, court cases have changed the definition of "wetland," which has created a new source of permitting delay.

-- National Environmental Policy Act of 1969 (NEPA) integration and lawsuits (464.5 tcf). The requirement that federal agencies evaluate the human and environmental effects of their activities and projects causes overlapping jurisdictions and creates delays. Lawsuits based on NEPA force agencies to take time to prepare "appeal-proof" documentation.

-- Pipeline certification (23.3 tcf). ANL cites estimates by the Interstate Natural Gas Association of America that obtaining approvals to build natural gas pipelines requires an average of 4 years.

-- Pipeline safety (integrity management). In response to recent gas pipeline accidents, federal officials are drafting safety requirements that might increase costs and disrupt supply. States can issue regulations more stringent than federal rules for intrastate pipelines.

-- Wetlands mitigation. Environmental opposition has arisen to recent moves by the Corps of Engineers to add flexibility to requirements for wetlands mitigation.

Cost increases
Issues that ANL says have the potential to increase costs—and thereby delay production, accelerate well abandonment, and cause operators to leave the market—include:

-- Cooling-water intake structures. The Environmental Protection Agency is developing regulations applicable to oil and gas production equipment under Clean Water Act requirements that cooling-water intake structures reflect the best technology available for minimizing environmental harm.

-- Electronic reporting and record-keeping requirements. The EPA's administration of a "cross-media electronic reporting and record-keeping rule" might require installation of systems incompatible with current data-management equipment. The American Petroleum Institute, ANL says, has estimated that EPA's proposed rule might cost the industry $1 billion.

-- Lack of incentives to go beyond compliance (86.6 tcf). Local, state, and federal authorities have rejected proposals that would provide environmental protection beyond legal requirements or provide equal protection at lower cost.

-- Louisiana E&P waste-disposal regulations. Amendments to the state's rules passed in 2001 might increase costs and delay gas projects. Other states might impose similar rules.

-- Maximum achievable control technology (MACT). EPA recently signed MACT rules—which regulate emissions of hazardous air pollutants—for turbines, process heaters, and reciprocating internal combustion engines that might affect gas operations.

-- Mercury discharge regulations. Concern has arisen that mercury in drilling mud discharged into the Gulf of Mexico might convert to toxic methylmercury, which can poison fish. The concern might spread to other onshore or offshore areas and lead to tightened mercury regulation.

-- Nitrogen oxide prevention of significant deterioration (PSD) increment consumption. Emissions are growing in areas in the West regulated by PSD standards, including from oil and gas drilling and especially from coalbed methane operations.

-- Noise regulations. Increased drilling and pipeline construction will make noise an issue and stimulate calls for regulation.

-- Nonroad diesel rule. Diesel engines used in E&P and gas processing could be subject to EPA efforts to reduce emissions.

-- Ocean discharge criteria. Proposed amendments to existing rules under the Clean Water Act would strengthen the criteria, which must be considered in the issuance of National Pollution Discharge Elimination System permits for offshore facilities.

-- Particulate matter regulations (7.2 tcf). Updates under consideration for the standard governing emissions of fine particles might require refit or replacement of diesel engines used at coalbed-methane production sites.

-- Pipeline gathering line definition. An update of the definition required by the Pipeline Safety Act of 1992 could require more lines and facilities to become subject to federal gas pipeline regulation.

-- Regional haze rule. EPA rules require states to establish goals for improving visibility in national parks and wilderness areas and to develop strategies for reducing emissions of related air pollution.

-- Spill prevention control and countermeasures. EPA in 2002 amended 1974 requirements in ways that would restrict gas drilling and production.

-- Standards for decommissioning or closing wells. State regulations can be unnecessarily protective or costly.

-- Storm-water construction permits (5.75 tcf/year). A 1999 proposal under study by EPA would require NPDES permits for E&P facilities of 1-5 acres.

-- Total maximum daily load regulations targeting oil and gas wells. The regulations, under the Clean Water Act, cover all contributors to a stream of a particular pollutant.