Vermont Law Top 10 Environmental Watch List 2013

Fracking and “Green Completion”: Still Incomplete

Summary:
As the fracking boom along with efforts to impose reasonable regulatory controls continues in President Obama’s second term, policymakers will be watching to see whether the direct benefits of the air pollution rule, and its cobenefits, materialize according to predictions.

Hydraulic fracturing, the controversial but booming gas drilling technology commonly referred to as “fracking,” is here to stay—along with the threats it poses to groundwater and human health. But will fracking also remain a nagging source of air pollution so that, as has happened at least once in Wyoming, smog levels exceed those recorded in Los Angeles? Or, in light of new rules adopted by the Environmental Protection Agency last year, will 2013 mark the end of this serious threat to air quality?

Alas, it is not likely, given that industry has two more years to comply fully with the rule. But neither is it impossible.

According to the Natural Resources Defense Council, the plume of volatile organic compounds (VOCs), climate-threatening methane and carcinogenic benzene that emanates from a fracked well, particularly during the transition from exploration to production, is like “popping the top of a soda can.” The new rule calls for “green completion”—essentially, a technological fix in which the gases are captured and the methane is later sold. The EPA has estimated that once the rule is fully effective and the exploration-production transition is accomplished in this green fashion, industry will actually save money—between $11 million and $19 million per year.

This smacks of win-win: The Obama administration implements what may have been the most aggressive move against climate change of the president’s first term—and industry profits increase as the nation’s vast reserves of shale gas continue to be exploited at upwards of 23 trillion cubic feet per year. As recently as 2000, shale gas comprised just one percent of the nation’s gas supply; today, it is more than 25 percent.

While implementation of the new rule begins over the course of 2013, it will be interesting to see how quickly green completions proliferate—after all, nothing prevents industry from starting to save that money before the still-distant deadline. And, of course, it is worth watching to see if any evidence materializes during the transition to support industry’s claim during the promulgation process that the EPA’s savings estimate was exaggerated.

The signs of progress this year, if any, will be quite visible. Prior to green completion, the new rule allows wells to flare the methane—i.e., address its harmful effects by burning the gas rather than storing it. As the flares are extinguished and the methane is captured, it will literally be the darkness that sheds the most light.

The environmental community is rightly wondering whether the second half of the Obama administration is differing from the first in its approach to climate change. In that regard, a useful benchmark might be the manner in which the new EPA rules on fracking-induced air pollution came into existence. Though the EPA has touted its initiative enthusiastically, it remains incontrovertibly true that President Obama touted increased domestic gas production during his re-election campaign and it took litigation to compel the EPA to act.

Specifically, the EPA moved forward under the terms of a settlement hammered out in the U.S. District Court for the District of Columbia with two environmental organizations, WildEarth Guardians and San Juan Citizens Alliance. (Both groups were represented by the public interest law firm Earthjustice, incidentally.) These groups argued that the EPA was required to regulate VOCs and other fracking-induced air toxics under the Clean Air Act. One might conclude, based on the consent agreement with the EPA, that they had a point.

Once they’d made their point and signed their agreement in February of 2010, it took them upwards of two years to get final action. The rules, which were first proposed in July 2011 and finally adopted in April 2012, set New Source Performance Standards (NSPS) for gas well sites and amend existing National Emissions Standards for Hazardous Air Pollutants (NESHAPS) for the industry. When fully implemented, the rules are expected to reduce VOC emissions from the shale gas industry by 95 percent and eliminate 12,000 to 20,000 tons of toxic air emissions annually. The EPA likewise estimates that these regulations would reduce methane emissions by 1 million to 9 million tons annually.

The new regulations have been criticized by industry and environmentalists alike. Many in the oil and gas industry believe the EPA overestimates how much revenue sales of extra gas and condensate will produce, foreseeing difficulties with finding potential buyers. There is also an issue of whether supply of completion equipment can meet demand in time for the January 2015 deadline when green completion will be required. Environmentalists fret that the EPA did not do enough to control methane, which has a heat-trapping capacity that is 20 times that of carbon dioxide. The EPA’s response is that the agency needs to collect more data on methane emissions before regulating more aggressively.

These days, it is fashionable to speak of the “cobenefits” of a particular regulatory initiative as federal agencies conduct a Regulatory Impact Analysis for each new rule as required by presidential Executive Order. The Regulatory Impact Analysis for this particular rule estimates $440 million in annual cobenefits by 2015 in the form of, according to the EPA, “avoided health impacts, crop damage, and damage to coastal properties.”

As the fracking boom continues and efforts to impose reasonable regulatory controls presumably continue in President Obama’s second term, policymakers will be watching to see whether the cobenefits of the air pollution rule and its direct benefits materialize according to predictions. If they do, perhaps this becomes a framework, or at least a precedent, for further efforts to address the broad range of environmental consequences that arise out of the high-pressure injection of water, chemicals, and sand into underground geographic formations to force natural gas to the surface—the high-stakes process that has become so central to the nation’s energy economy.