API, WEA officials warn of threats from federal over-regulation

Improved technology and increasing production has improved the US oil and gas outlook, but federal over-regulation could imperil realization of a brighter energy future, officials from two industry associations warned on Feb. 2.

Improved technology and increasing production has improved the US oil and gas outlook, but federal over-regulation could imperil realization of a brighter energy future, officials from two industry associations warned on Feb. 2.

They applauded US President Barack Obama’s commitment in his Jan. 24 State of the Union address to pursue an “all-in, all-of-the-above” energy strategy, but questioned whether increased federal onshore oil and gas regulations will help achieve this goal.

“Despite the rosy rhetoric of supporting greater energy development, the president is talking about adding layers of regulations—and not removing them—from development of natural gas from shale,” Richard Ranger, senior policy advisor at the American Petroleum Institute, said in a teleconference.

“When Americans are convinced that everything’s okay, they will lose the sense of urgency that have forced government to address energy challenges,” he observed. “This is something this country can’t afford as the nation’s economy begins to recover.”

When Rocky Mountain producers lease on federal lands, they have to spend 5 years analyzing potential impacts under the National Environmental Policy Act and getting permits, noted Kathleen Sgamma, vice-president of government and public affairs at the Western Energy Alliance in Denver, who also participated.

“With over 40,000 wells held up in the NEPA analysis with no end in sight and delays in getting permits, we’re concerned that the West will be at a competitive disadvantage to areas where public lands aren’t predominant,” she told reporters.

‘A political will’

“We know that this administration can do the analysis required under NEPA for wind and solar projects onshore in 9 months. Since this is comparable to what’s required for oil and gas projects, it shows there’s a political will where the administration thinks it’s necessary,” Sgamma continued. “Without it, oil and gas project applicants spend up to seven years getting permits.”

Ranger said a study that API released on Jan. 19 found that US Bureau of Land Management oil and gas leases in 2009-10 were 44% below their 2007-08 level, while permits and new wells drilled both dropped by 39%. The study by EIS Solutions in Grand Junction, Colo., said that while the 2007 US economic downturn contributed, leasing, permitting, and drilling declines were nearly twice as great on federal acreage than on nonfederal land in the West.

“We think a moratorium on new layers of regulation is advisable,” said Ranger. “We’d also like to see a fresh look at how oil and gas activities are regulated, and consideration of tighter adherence to timelines and greater attention to procedures. We’re looking for clearer requirements with a commitment to expeditious, committed procedures so the West isn’t put at a disadvantage to other parts of the country.”

Their teleconference came as BLM considers proposing hydraulic fracturing regulations for activity on acreage under its jurisdiction. “We have told BLM that concerns over hydraulic fracturing are being competently addressed by state professionals, and that additional regulations will increase the complexity of trying to drill on public land,” Ranger said.

“Right now, BLM is struggling to meet its obligations with shrinking budgets and no additions to its staff,” Sgamma added. “How is it going to handle a new layer it doesn’t have experience regulating? We’ve seen manufacturing move overseas because of redundant environmental regulations. It would be a real shame if we made the hydraulic fracturing permitting process so bureaucratically cumbersome that we offshore that as well.”

‘Very bureaucratic’

She said some federal agencies are trying to collaborate, and WEA and its members are pleased that they’re trying to share information. “But they’re trying to do this under a very bureaucratic process that needs to be updated and modernized,” Sgamma said. The 2005 National Energy Policy Act established pilot programs for BLM and the US Forest Service to begin streamlining permit processes with the US Environmental Protection Agency and other federal entities, “but it produced more bureaucracy instead,” she said.

She and Ranger said western US states have some of the nation’s strongest oil and gas regulations and experienced professionals to enforce them. State regulatory staffs visit drill sites more frequently and are better acquainted with areas’ specific hydrology and geology, the API official observed.

“They’re supported by organizations such as the Interstate Oil & Gas Compact Commission and the Groundwater Protection Council, which continually work with them and try to improve environment protection while encouraging responsible exploration and production,” said Sgamma. “That’s where the experience lies—not at BLM or EPA.”

“These people have a degree of experience and knowledge that addresses the policies that need to be carried out. There’s an exchange of information and technological information,” said Ranger. “By contrast, the number of federal agencies looking only at hydraulic fracturing has increased from BLM to EPA and DOE. We even have the Securities and Exchange Commission and the US Department of Health and Human Services conducting studies.

“We’re concerned that all of this could lead to additional delays and obstacles as the studies are completed,” he explained. “Increased concern and federal interest could only add delay to development of resources we believe are vital to American taxpayers and the US economy.”

Contact Nick Snow at nicks@pennwell.com.

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