Obama administration takes first step towards regulating shale

US Presidential Seal
Source; DollarPhotoClub

On Friday, the Obama administration made the first move towards regulating shale industry in the U.S. by introducing new environmental safeguards on shale drilling on federal land. According to the Financial Times, the White House hopes that the new rules – which were condemned by the oil and gas industry – will serve as a blueprint for state regulators who supervise the oil and gas industry on private land.

The new regulations aim chiefly at tackling the issue of groundwater contamination that is a risk whenever shale exploration takes place. Companies that drill on public lands would be subject to stricter design standards for wells and also for holding tanks and ponds where liquid wastes are stored. They would also have to disclose the chemical make-up of fracking fluids – something that some companies already do voluntarily, while others; like the oilfield giant Halliburton, consider a breach of their trading secrets.

Although they apply only to oil and gas drilling on federal lands, which is about a quarter of the country’s current fossil-fuel output, the Interior Department rules proved unpopular with both the industry and the environmentalists, who will not be satisfied by anything less than a total ban on fossil fuel extraction.

Two industry groups – The Independent Petroleum Association of America and Western Energy Alliance – have announced that they are going to take legal action to counteract the rules which they called a “reaction to unsubstantiated concerns.”

“These new mandates on hydraulic fracturing by the federal government … are the complete opposite of common-sense,” Barry Russell, president of IPAA, said in a statement.

“Hydraulic fracturing has been conducted safely and responsibly in the United States for over sixty years,” he said. “These newly mandated fees will add burdensome new costs on our independent producers, taking investments away from developing new American-made energy, much-needed job creation and economic growth.”

Tim Wigley, president of Western Energy Alliance, said states have shown that they are capable of effectively regulating fracking, including on federal land.

“If anything, BLM should be delegating more to the states in recognition of their exemplary environmental and safety records, not implementing new federal red tape that is not properly justified,” he said.

The Hill reports that House Speaker John Boehner promised on Friday that Republicans will “do all [they] can” to fight Obama’s new regulations on fracking.

“The Obama administration is so eager to appease radical environmentalists that it is regulating a process that is already properly regulated,” Boehner said.

Interior Secretary Sally Jewell defended the regulations, arguing that they are “common-sense” changes that would allow “responsible development while protecting natural resources.”

“Current federal well-drilling regulations are more than 30 years old, and they simply have not kept pace with the technical complexities of today’s hydraulic fracturing operations,” said Jewell. With millions of acres of federal land open to oil and gas exploration, “it is absolutely critical the public have confidence that transparent and effective safety and environmental protections are in place,” she said.

The Department of the Interior played down the impact the rules will have on companies, saying that complying with them would cost less than 0.25 per cent of the cost of drilling a well. However, oil and gas players argue that this is a particularly bad time to be piling on difficulties for the industry which is already struggling with low oil prices and squeezed profit margins.

Rachel Pierson, an energy analyst at Beacon Policy Advisors, doesn’t agree. “This shouldn’t stand in the way of the shale revolution at all. It’s not extremely strict,”  she told the FT. “The White House is going to let it keep rolling.”

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