The Uncertain State of Regulation

Last week, we learned about plans for a new set of regulations covering natural gas production from hydraulic fracturing. And this week, the Interior Department has said that those forthcoming rules are still being defined and it’s unclear when they will be released.

If it sounds familiar, that’s because it is. The U.S. oil and gas industry, already slowed by uncertain policies covering exploration and production in Alaska and Texas, and by mixed messages surrounding the Keystone XL Pipeline, now is bracing for another set of rules covering a sector that has been a major growth engine for the national economy.  Hydraulic fracturing has lead the resurgence in natural gas and oil development in our country, allowing producers from North Dakota to South Texas and Pennsylvania tap into shale rock to bring these resources to consumers. Meanwhile, manufacturers are building new plants and bringing jobs back to the United States, thanks to lower natural gas prices and better access to stable supplies.

While CEA has always promoted the responsible production of all of our natural resources, we also know it’s important to draw a distinction between safe, environmentally friendly practices and excessive regulation. Indeed, the layering of regulations on top of other regulations results in a high cost to industry, and, therefore, higher costs for consumers.

At a time when we need businesses to move forward and commit to new investments and hiring, uncertainty over new regulations that may be imposed in the future makes it hard for businesses to commit to much of anything. Indeed, the chief economist of the National Association of Manufacturers said recently that the uncertain U.S. regulatory environment ranks among the top concerns among manufacturers seeking assurance about a steady supply of shale gas. “We depend heavily on energy and we need affordable sources of energy to allow manufacturers to expand,” the economist, Chad Moutray, said. That same story quotes the chief economist of the American Petroleum Institute describing U.S. energy and economic policy as being at a crossroads, where the abundance of home-grown resources is often at odds with tax and regulatory policy.

As the U.S. continues to slowly recover from the economic downturn, we need policies that give businesses and manufacturers a level of certainty about the climate they will be operating in going forward rather than leaving them with the impression that additional costs on them may be imposed at any time.