Natural gas execs: Regulation of fracturing best left in state hands

Energy company executives argued today that states — not the federal government — should take the lead in regulating the hydraulic fracturing process used to produce natural gas from shale formations in New York, the Midwest and Texas.

Geologic differences among those regions mean that what works in one state might not work in another, said Jack Williams, president of XTO Energy. For instance, in Arkansas and Texas, natural gas developers are finding ways to inject the water they use back into the ground — something that generally can’t be done in a different shale formation in the northeast.

From state to state, “the regulations are different, and they need to be, depending on the local circumstances,” Williams told an Energy Department advisory panel considering whether more needs to be done to protect the public and the environment from hydraulic fracturing operations. “That’s the beauty of having states playing this role. They can tailor their regulations” to unique regional conditions.

The panel is holding two days of hearings in Washington, D.C., to study hydraulic fracturing , with today’s session focused on the views of environmentalists and industry representatives. State regulators, including Texas Railroad Commissioner Elizabeth Ames Jones, are set to speak on Thursday .

President Barack Obama charged the group with developing its recommendations within 90 days, even as separate reviews of hydraulic fracturing are under way at the Environmental Protection Agency and the Interior Department.

Right now, states take the lead role in regulating hydraulic fracturing, the process of injecting mixtures of water, sand and chemicals deep underground and at high pressures to unlock natural gas trapped in shale rock. A big question Wednesday was whether the feds need to get more involved.

Industry leaders stuck to their common argument that regulation should remain in state hands.

“Every state has a right to permit a well, and every state has a right to insist on certain practices,” said James Hackett, CEO of The Woodlands, Texas-based Anadarko Petroleum Corp. “We have to be careful what we do federally. I would just beg you to please consider a state organization, with multiple stakeholders, as the primary way to get your information and insist on enforcement.”

That, Hackett said, is “going to be the most responsive to the actual conditions on the ground.”

But Lauren Pagel, policy director of the environmental group Earthworks Action, argued that the patchwork of sometimes spotty state regulations leaves some landowners and local residents vulnerable when natural gas wells are drilled and stimulated nearby.

“Just because you’re in Pennsylvania doesn’t mean you’re more deserving of public health and safety than someone in Wyoming,” she said. “We need a federal standard that deals with natural gas production in this country. Without that, you’re never going to get the public confidence that is needed to move this industry forward.”

Conservationists have long been concerned about the high water demands of fracturing and about how operators dispose of wastewater. Environmentalists also have warned that natural gas can escape out of poorly designed and secured wells.

But fears about fracturing also have been stoked by the documentary “Gasland” and a series of recent studies that cast doubt on the technique’s environmental soundness.

Today, environmental advocates and industry representatives found some common ground in agreeing that natural gas developers are up against a big image problem.

Even with major technological and environmental advancements in recent years, “that story is not out there in a believable and effective way with the public,” noted John Deutch, the panel chairman.

Chesapeake Energy CEO Aubrey McClendon warned against assuming that there was a “rogue element” and a band of laggards in the industry who eschew best practices. “I don’t think it exists,” he said, even though “you will find weak companies making mistakes from time to time.”

Paul Gallay, executive director of Hudson Riverkeeper, urged the natural gas industry to make a full accounting of problems that have been caused by hydraulic fracturing and poorly designed or managed wells. Industry leaders need to “acknowledge the damage caused and make a firm commitment to a future that does not involve similar damage,” Gallay said. After all, he added, ” you still to this day hear industry representatives . . . say this is all vastly overblown.”

The backdrop for today’s natural gas forum is deep skepticism from the environmental community about the composition of the advisory panel, which includes members with ties to the energy sector. Dusty Horwitt, senior counsel of the Environmental Working Group, said the panel had a pro-industry bias and told Deutch he should step down.

Deutch was on the board of the oilfield services firm Schlumberger for 10 years and is currently on the board of Houston’s Cheniere Energy. According to EWG, six of the seven panel members have financial ties to oil and gas.

“We’re spending $700 thousand in taxpayer dollars to create an industry-dominated panel,” Horwitt said. “We have to have higher standards for impartiality.”

Dave Alberswerth, a senior policy adviser at The Wilderness Society, said there is skepticism about the panel’s makeup and added: “We’re not expecting much useful to come out of this panel” because of it.

Deutch laid out four areas for the panel’s analysis:

  • Whether there should be a national database on shale gas production. Some companies are disclosing information about the contents of their hydraulic fracturing fluids voluntarily on the website FracFocus. But Deutch noted that much of the data is “widely dispersed” and divided by states.
  • Whether an industry organization — with involvement from state regulators and other stakeholders — should be created to establish best engineering and environmental practices for shale gas operations and the chain of companies that supply them. Deutch raised the prospect that, over time, companies who are certified as compliant with those best practices could qualify for fast-track permitting or other incentives.
  • How water issues should be managed — including the composition of frac fluids, whether there should be background research on water quality in areas where shale gas operations are about to begin and the chemical composition of produced water from natural gas wells.
  • Technological advancements in the industry — and how to keep pace with them.

Industry representatives divided over disclosure, with Rodney Nelson of Schlumberger noting that concerns about releasing proprietary information have fed a public perception that the industry is hiding details about the ingredients in fracturing fluids. “Companies are trying to protect their investments . . . so there is some reluctance” to be open in releasing those proprietary details,” Nelson said.

If states clamp down and insist on more detailed disclosure — as envisioned in legislation just passed by the Texas legislature — Nelson said that would force Schlumberger to make tough business decisions about whether to offer some of its fracturing fluids in those regions.

But Gary Luquette, president of Chevron’s North American exploration and production business, called out service providers for hiding behind the intellectual property concerns.

“We have used this IP issue as a convenient excuse to move slow,” Luquette said. “I personally believe there is a space in the middle between protecting the IP and giving the public the information they desire. We can do that in a much more transparent way.”

15 Comments

  1. Eric_7_V2

    Wow. They’re actually admitting that different geologic formations result in different risks and therefore require different regulatory approaches? Deep shale formations, as in Haynesville, are much less risky than the Marcellus formations which are shallower and have much more fractured systems. All the industry needs to do is be honest and sypathetic with public skepticism and this will be a huge success. I fully support hydraulic fracking compared to the alternative energy sources.

    #1
  2. marvin

    And yet, their actions have the potential to pollute sub-surface water resources that are often interstate. Therefore, constitutionally, these regulations are within the purview of the federal government.

    This doesn’t surprise me though. They want to rely solely on state regulation because it has historically been much less stringent and much more open to corruption and, in some cases, out right bribery.

    #2
  3. TransAmer99

    “According to EWG, six of the seven panel members have financial ties to oil and gas.”

    Probably 7 out of 10 working Americans also have financial ties to oil and gas through their 401k’s and individual investment portfolios. Even government pensions are heavily invested in energy companies.

    Furthermore, not having panelists with real-world exposure and expertise the industry would dumb down the level of bureaucracy of the study panel for exactly those reasons: lack of experience and understanding; leading to ineffective recommendations and policies.

    #3
  4. AnimuX

    Apparently, it’s much easier for a multi-billion dollar annual profit energy corporation to manipulate individual state elections than national regulations and so they argue against Federal oversight.

    #4
  5. Knowingly nodding

    Isn’t it funny how corporations bounce back and forth between state regulation and federal regulation? On the one hand, they want federal, not state, regulation of people’s right to sue over things like auto safety, pharmaceuticals and product liability but, when these O&G companies think they can control a state legislature, they say they want state regulation. And they take these positions with a straight face. Shameless.

    #5
  6. Paul S.

    Eric_7_V2, why would you support fracking over solar or hydrogen power? Have you seen Gas Land?

    #6
  7. Dave

    Paul S. – Gasland was not an accurate portrayal of the industry. The film itself was replete with factual inconsistencies, errors and outright lies. Having said that, I agree with Knowingly Nodding. Big O&G is shameless, as shameless as Big Pharma, Congress and Wall Street in terms of their willingness to lie to the American people. Get better research, though. Don’t rely on some slanted, yellow sensation piece like Gasland for your information. That would be like me George Costanza watching the movie Breakfast at Tiffany’s rather than reading the book.

    #7
  8. Trail Trash

    The guy who made the movie Gasland is a hypocrite, like so many others. He said he was againt drilling for gas and fracing, yet the opening shots show two 5-gal bottles of propane behind his house.

    #8
  9. TransAmer99

    Anyone who favors federal hands in the pockets of how things are done needs to realize a few things. First, anytime there is federal oversight, the states loose the right and the ability to regulate or influence policy in such ways as may be of benefit to the state.

    Secondly, ever time the federal government gets involved in anything, there is bloated bureaucracy that wastes time and costs dollars. EVERYONE’S dollars. Then, any additional costs incurred by business by this oversight is also appsed on to consumers, making it a double-whammy.

    Finally, the federal government has already demonstrated it’s inability to successfully run healthcare: Medicare and Medicade are essentially bankrupt; a financial empire: the government operates on an ever-increasing deficit year-to-year; or an automotive business: nothing the government has done has led to GM doing any better or made cars any more affordable to consumers.

    Those who insist on viewing O&G firms as greedy, non-caring corporations have never worked for an energy company or seen first-hand how they benefit the communities in and around where they do business. An oil company only profits about three cents per gallon of gasoline on a good day. The billions in profits are not about price-gouging, but rather the tens of billions of galons of products sold. Their profit-over-revenue ratio stands at less than 10%. Compare that to Nike at 25%, banking at 53% or pharmaceuticals at upto 80%. Furthermore, compare the price of a gallon of gas to that of a gallon of milk. If you had a couple of hours, I could explain how difficult it is to find oil. How difficult do you suppose it is to find milk?

    #9
  10. NoWhining

    One only has to look at the successful development in North Dakota to know hydraulic fracturing is a safe, well established practice and well regulated under existing state regulations. Everything else is enviro-alarmists wanting to raise funds for their ‘new’ cause.

    #10
  11. Jeremy

    marvin

    “This doesn’t surprise me though. They want to rely solely on state regulation because it has historically been much less stringent and much more open to corruption and, in some cases, out right bribery.”

    Yeah because that doesn’t happen on the Federal level……

    Give me a break. Local politicians are ALWAYS more accountable than guys hundreds of miles away in DC.

    #11
  12. marvin

    Jeremy,

    “Give me a break. Local politicians are ALWAYS more accountable than guys hundreds of miles away in DC.”

    Uh, I beg to differ. Have you ever worked with the state government here? They are some of the most corrupt, inept politicians I have ever had the unfortunate opportunity to be involved with.

    Do you remember the incident with Lonnie “Bo” Pilgrim, founder of Pilgrim’s Pride, handing out $10,000 checks on the floor of the Texas Senate during the vote on a bill to gut worker’s compensation laws in the state (which of course he supported)? That is Banana Republic levels of corruption. Buying votes on the floor of the Texas Senate. Even in Mexico they have the decency to do it behind closed doors.

    #12
  13. Sure they want state vs Feds to over see them they are easier to buy.

    #13
  14. tboy

    Gasland was a story about real people affected by fracturing. There was no lie to those stories.

    #14
  15. Clayton Phillips

    What’s so funny about this article is the picture that the editor attached it is a drilling rig or Derick, and not a picture of a well site where actual hydraulic fracturing is actually happening, with sand kings, pumper trucks and blenders, or water transfer pipes to pump down the water, sand and chemicals. Nor even a Frac van that controls the operation. People have no idea what they are talking about nor picturing when talking about hydraulic fracturing, Frac is not a type of drilling operation it is in completion. To make more gas freely come to the surface after the well as already been drilled.

    #15