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Issues » Fact Sheets
Natural Gas Fact Sheets
Regulatory Relief
The petroleum and natural gas exploration and production (E&P) industry is highly regulated by both state and federal governments. Taken together, these regulations add costs to the production of domestic petroleum and natural gas. The government needs to reduce or eliminate unnecessary regulations. As the 1998-99 low petroleum price crisis demonstrated, both state and federal governments need to act to reduce regulatory costs on domestic production. Moreover, in general, since U.S. production is already some of the world’s highest cost production, it is essential to minimize regulatory costs to enhance and maintain domestic production, not only of petroleum but clean burning natural gas as well. The federal government is a pervasive factor at all levels.
For example, while state governments impose most direct environmental controls, overarching federal standards or pressure drives these actions. Currently, for example, EPA has initiated an effort to address the Total Maximum Daily Load (TMDL) of pollutants on U.S. water bodies. While this is intended to address major discharges of contaminants, it can result in inadvertent requirements on the E&P industry if it excludes the major contributors. Similarly, new EPA regulations will reduce the size of facilities that are subject to new stormwater construction permitting requirements. While EPA argues that these will not the burdensome requirements, they have not yet been applied. These types of actions must be carefully written to eliminate excessive costs and paperwork on E&P operations with no environmental benefit
Similarly, the federal government has pending proposals that need to be ended. For years, EPA has considered applying the Toxic Release Inventory program to the E&P industry – where it was never intended to apply. It would be costly and provide meaningless information. Now is the time for EPA to end this threat. Rather, EPA should look for ways to further simplify the Right-To-Know requirements currently imposed on the E&P industry.
Other EPA issues include action to create inappropriate controls on hydraulic fracturing and new regional haze regulations. As a result of a contrived interpretation of the federal underground injection control (UIC) program in the LEAF v. EPA case, EPA has now required regulations in Alabama that compel the use of federally certified drinking water in hydraulic fracturing in coal bed methane operations. However, LEAF has instituted another case that could result in the national application of these or more burdensome regulations on an environmentally benign activity. At a time when the nation needs to develop its domestic natural gas resources – development that will hinge on the use of hydraulic fracturing – Congress needs to confirm the longstanding intent of the Safe Drinking Water Act that it is not intended to regulate petroleum and gas E&P drilling operations.
The federal government has an even greater influence on E&P operations on federal land where it sets all the conditions. Here, the Department of Interior has recognized that it can act. DOI extended lease periods to reflect the 1998-99 price crisis. But, more can be done. IPAA has identified a specific list of action steps that should be undertaken regulatory or legislatively, if necessary. These are promoting the timely development of coalbed methane resources, transferring federal responsibilities to states, royalty relief for marginal offshore and onshore properties, improving the NEPA process, and obtaining an accurate inventory of government controlled petroleum and gas resources. These actions should be taken regardless of price to increase domestic supply.
More importantly, in order to meet the country's energy needs, government controlled land production must dramatically increase. The National Petroleum Council Natural Gas Study identified access to the national resource base as a key factor in meeting the future demand for this energy source. Much of the onshore natural gas resource base is located in the Rocky Mountains where federal policy limits access to an estimated 137 trillion cubic feet of natural gas. The constraints differ. Monument and wilderness designations prohibit access. Regulations like the Forest Service roadless policy and prohibitions in the Lewis and Clark National Forest are equally absolute. At the same time the permitting process to explore and develop resources can work to effectively prohibit access. These constraints range from federal agencies delaying permits to revise environmental impact statements to habitat management plans overlaying one another to prohibit activity to unreasonable permit requirements that prevent production. There is no single solution to these constraints. What is required is a commitment to develop these access policies with a full recognition of the importance of developing the natural gas resource. A good first step is an inventory of resources under federal lands to determine where potential conflicts might exist rather than continue the current abstract debate.
Unfortunately, much of the natural gas production debate will rage over allegations of environmental risk. It should not be an issue. As stated in the Department of Energy’s Environmental Benefits of Advanced Oil and Gas Exploration and Production Technology publication, "Resources underlying arctic regions, coastal and deep offshore waters, sensitive wetlands and wildlife habitats, public lands, and even cities and airports can now be contacted and produced without disrupting surface features above them. Wildlife preserves and conservation easements are created and managed jointly by industry, environmental, and government stakeholders. In Alaska, such new approaches as ice pads and roads, multilateral completions, and annular injection of drilling wastes minimize environmental impacts while also reducing costs."
Taken together, federal regulatory actions can further burden the development of clean burning natural gas essential to meet future energy needs and worsen the national dependency on foreign petroleum. In the national interest, regulatory restraint and relief is essential.
August 2000
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