API official asks administration to pursue innovation, not regulation

The Obama administration should rely more on oil and gas industry innovation and cooperation, and less on heavier federal regulation, as it moves into its final year, an American Petroleum Institute official recommended.

The Obama administration should rely more on oil and gas industry innovation and cooperation, and less on heavier federal regulation, as it moves into its final year, an American Petroleum Institute official recommended.

The US oil and gas industry is a case study on how the nation can continue to make its general economy grow, create more jobs, and protect the environment through market-driven innovation, API Upstream and Industry Operations Group Director Erik Milito said.

“By continuing to rely on industry innovation, basing decisions on sound science and providing for oil and gas energy opportunities, we can build on the success of the past decades,” he told reporters during a Feb. 4 teleconference prior to the White House’s scheduled release of its proposed fiscal 2017 federal budget on Feb. 9.

Milito said the situation is different now than it was a few years ago, when the US basically was counted out as a global energy superpower.

“Technology has made the difference in allowing the industry to produce the oil and gas we rely on in our daily lives, while at the same time providing environmental benefits,” he said. “Vast supplies unleashed by hydraulic fracturing have allowed gas to generate much more of American’s electricity. In other words, were it not for [fracing], our carbon emissions would be much higher.”

Methane emissions from fraced wells fell about 80% in the 2005-13 period as domestic oil and gas production grew by one of the largest amounts in history, Milito said. “Methane is the primary component of gas—a product we sell—and companies [have the incentive] to capture as much methane as possible so that it can be delivered to customers. The data show that companies are doing just that,” he said.

More regulations proposed

But both the US Bureau of Land Management and US Environmental Protection Agency are moving forward with methane regulation proposals that do not provide tangible benefits, but could actually restraint domestic producers’ ability to develop resources as well as the nation’s oil and gas technology leadership, Milito warned.

“The industry has developed technologies to reduce emissions from [fracing] completions, equipment to phase out high-bleed pneumatic controllers, technologies to reduce emissions from storage tanks, and methods for detecting leaks,” he said. “All of this has occurred outside of the regulatory process. Unfortunately, the EPA and BLM rules overlap, and also duplicate, state regulations.”

API’s development of more than 500 industry standards and practices through a process accredited by the American National Standards Institute allows experts from the government, the industry, and engineering and safety companies to work together and develop consensus recommended best practice approaches, he noted.

“Offshore energy development is a perfect example of how innovation and standards development have combined to enhance the safety in operations,” Milito said, citing API Standard No. 53 which governs well blowout prevention systems.

“Unfortunately, the Bureau of Safety and Environmental Enforcement has proposed a well control rule (OGJ Online, Apr. 14, 2015) that goes well outside the scope of API Standard 53, and could create unintended safety consequences and lead to a decline in offshore oil production,” he said.

BSEE expanded its proposed offshore BOP regulation beyond the API standard into other areas, Milito said. “It proposed a very strict drilling margin in which you must drill a well, yet the great majority of wells which are being drilled are outside of that margin,” he said. “The prescriptive types of regulations being advanced by EPA, BLM and BSEE could stifle innovation by locking in specific types of technologies through the regulatory process.”

Base decisions on science

Milito also urged the administration to base more of its energy policy decisions on sound science. He said that EPA’s Science Advisory Board continues to hear arguments that fracing is unsafe the agency’s own findings in a 5-year study which found the process does not threaten drinking water supplies. “Interestingly enough, the US Department of Energy has identified hydraulic fracturing as an advanced technology that provides environmental benefits and protects groundwater,” he said.

“After 65 years and 2 million wells, the evidence and science are credible and clear,” Milito stated. “The data and facts overwhelmingly support the conclusion that hydraulic fracturing can be done safely. We need to ensure that our government processes stick to the credible science.”

Allowing more access to federally administered acreage lands for oil and gas effectively would embrace a free market approach, he suggested. “Most of today’s production increases stem from projects that started before this administration came into office, and most of it is happening on state and private lands,” he said.

With 87% of all federally controlled US offshore acreage off-limits to oil and gas activity, Milito said it is essential that more areas are included in the 2017-22 US Outer Continental Shelf management plan which the US Department of the Interior is preparing.

He urged the administration to keep all OCS options on the table, and expressed disappointment that a segment off Mid-Atlantic states is the only new area where a lease sale might be held during the next 5-year plan.

“We saw a positive bipartisan policy proposal under consideration in the US Senate yesterday that would provide revenue sharing to coastal states where offshore oil and gas development occurs,” Milito said. “Policies like this are essential for our long-term energy security.”

Contact Nick Snow at nicks@pennwell.com.

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