The People of America's Oil and Natural Gas Indusry

EPA Needs to Fix Air Emissions Proposal

Rayola Dougher

Rayola Dougher
Posted March 15, 2012

Howard Feldman, API director of scientific and regulatory affairs, spoke with reporters today about proposed rules for oil and natural gas air emissions.  This is what he had to say.

EPA's proposed rules for the oil and natural gas sector, which address sources of air emissions including those associated with hydraulic fracturing, are due to be finalized in the first week of April. The rules are important because they would over time affect hundreds of thousands of natural gas development operations.

A new study conducted by Advanced Resources International, which we are releasing today projects the rules as proposed would significantly slowdown drilling, resulting in less oil and natural gas production, lower royalties to the federal government, and lower tax payments to state governments.

Unless EPA makes changes to the proposal, the study found that between the time these rules are implemented and 2015:

  • Overall drilling for natural gas using hydraulic fracturing would be reduced by up to 52%, reducing drilling by as much as 21,400 wells;
  • Natural gas production from hydraulically fractured wells would decline by up to 11% compared to what would otherwise have been developed;
  • Oil production from hydraulically fractured wells would decline by up to 37% compared to what would have otherwise been developed;
  • The federal government would not collect up to 8.5 billion dollars in royalties due to reduced drilling and production;
  • State governments would not collect up to 2.3 billion dollars in severance taxes due to reduced drilling and production.

This analysis does not even attempt to estimate the lost jobs and decline in other economic benefits that would result from reduced drilling and reduced oil and gas supply services.

As we suggested in our comments on the proposal, EPA must make changes to this rule and allow for reduced emissions while not impeding the massive job creation and economic revitalization that we’ve seen in states like North Dakota and Pennsylvania due to the shale boom.

First, reduced emission completions requirements should be less prescriptive and limited to circumstances that are cost-effective and technically feasible. A one-size-fits-all approach will not work.

EPA should also allow more time to implement the requirements once they are final. The equipment prescribed to conduct reduced emission well completions will simply not be available in time to comply with the current final rule schedule.

Manufacturers and industry need two to three years to design, manufacture and certify a sufficient number of control devices and train personnel.

We also think the system of notifications, monitoring, recordkeeping, performance testing and reporting requirements for compliance assurance must be simplified. Taken as a whole, these requirements would be overly burdensome for the small and/or temporary facilities that EPA is regulating. They would waste time and resources for the industry and EPA.

The benefits of shale energy development are indisputable. Nationwide, shale gas development was supporting 600,000 jobs in 2010, according to a December IHS-Global Insight report. Natural gas prices have fallen by half from their level three years ago. That is benefiting families that heat their homes with natural gas, as well as businesses and consumers that buy their electricity from utilities that generate it with natural gas.

Low natural gas prices are also benefiting chemical manufacturers and other businesses that use natural gas as a raw material, and that is encouraging businesses to locate new facilities in America rather than overseas.

The president has called for his administration to reign in burdensome regulations. At a time when the government is desperate for revenue, and America’s gasoline prices are high, applying overly burdensome regulations would be bad public policy and could place an even bigger burden on Americans in the form of higher energy costs.

EPA can fix these rules so they reduce emissions yet are still compatible with oil and natural gas development that creates jobs, government revenue and improves our energy security. We ask them to keep these recommendations in mind as they finalize the rule.

ABOUT THE AUTHOR

Rayola Dougher is senior economist at The American Petroleum Institute (API), where she analyzes information, manages projects and develops briefing materials on energy markets and oil industry policy issues. She is the author or co-author of economic research studies covering a diverse range of topics including crude oil and petroleum product markets, gasoline taxes, energy conservation and competition in retail markets. In addition to testifying before federal and state legislators, she has participated in numerous newspaper, radio and television interviews on a wide range of issues affecting the oil industry, including crude oil and gasoline prices, industry taxes and earnings, exploration and production, and refining and marketing topics.

Prior to joining API, Rayola worked at the Institute for Energy Analysis where her research focused on carbon dioxide related issues and international energy demand and supply forecasts. Rayola holds a Masters degree in Economic Development and East Asian studies from the American University and a degree in History and Political Science from the State University of New York at Brockport.