Environmental Protection Agency (EPA) regulations could sharply reduce drilling for natural gas and oil production, according to a new study from the American Petroleum Institute (API). The proposed New Source Performance Standards (NSPS) for oil and natural gas production will impact new hydraulically fractured gas wells and existing gas wells that are “re-fractured.”

According to the API press release, the study found that the proposed regulations would:

• Reduce drilling for natural gas using hydraulic fracturing by up to 52 percent;
• Reduce natural gas production by up to 11 percent; and,
• Reduce oil production by up to 37 percent.

These dramatic reductions in domestic production would result in the federal government losing up to $8.5 billion in royalties and state governments losing up to $2.3 billion in severance taxes.

There is no doubt that the shale gas boom has provided manufacturing operations with a reliable and affordable supply of energy. These proposed EPA regulations, however, threaten to slow fossil fuel production and potentially increase prices as manufacturers are trying to create jobs and boost the nation’s economy. The NAM urges the EPA to ensure these rules allow oil and natural gas producers the appropriate flexibility they need to comply with the regulations in a cost-effective manner.

Alicia Meads is director of energy and resources policy, National Association of Manufacturers.

On the energy front, one of the biggest stories of 2011 was the development of shale gas.  And, if the current trends continue, it will likely be the story of 2012 as well.

The Wall Street Journal reports,

The boom in low-cost natural gas obtained from shale is driving investment in plants that use gas for fuel or as a raw material, setting off a race by states to attract such factories and the jobs they create.

Recently, natural gas prices have plummeted.  “Because electric utilities often burn gas,” the Journal notes, “that price drop has helped bring down average electricity costs.

That’s a big deal for manufacturers, which consume one-third of the energy produced in this country. Lower energy prices make manufacturers more competitive and help offset other areas where manufacturers in the country are at a disadvantage compared to our competitors.

The shale boom’s impact on manufacturing was highlighted in a recent report completed by PricewaterhouseCoopers and released jointly with the National Association of Manufacturers.

The report shows that shale development means more investment in our economy, lower energy prices and one million more jobs by 2025.

Today, the Secretary of Energy Advisory Board Subcommittee (SEAB) on Shale Gas Production released its second and final ninety-day report which analyzes the progress that has been made on the recommendations of its previous report, issued on August 18, 2011. The new report criticizes federal agencies, state governments, industry and public interest groups for not moving quickly enough on its recommendations of increased regulation on hydraulic fracturing – a critical technology that allow us to access the nation’s rich shale gas resources.

For example, the SEAB urges more regulatory action on the following areas:

• Air Emissions – Even though the Environmental Protection Agency (EPA) is currently working on regulations that would reduce emissions at hydraulic fracturing sites, the SEAB’s report claims the proposed rules do not go far enough and should be expanded to include more wells.
• Chemical Disclosure – The SEAB wants to see more disclosure of the chemicals used in hydraulic fracturing fluid and believes that there should be an extremely high bar for trade secret protection. The subcommittee quickly discounts current efforts underway including voluntary disclosure websites such as fracfocus.org and the Department of Interior’s (DOI) intent to require the disclosure of fracturing fluid composition on federal lands.
• Water Discharge Standards – The EPA is currently in the process of studying the impact of hydraulic fracturing on drinking water and has also announced a schedule setting waste water discharge standards for some fracturing activities. The SEAB, however, believes that the EPA should not wait until the study is complete to take additional regulatory actions.

The SEAB’s draft report outlines unrealistic expectations and does little to highlight the efforts that industry and regulators have already made to ensure that these activities are conducted safely. It is unreasonable to expect that industry and federal, state and local regulators could institute complex new regulatory programs in three months. Increased access to our nation’s shale gas resources means more affordable energy and more jobs for our nation’s struggling economy. The SEAB’s recommendations to pile on unnecessary and complex regulations could quickly put an end to the nation’s shale gas revolution.

Steubenville, Ohio was hit hard by the previous recession.  But, as ABC News reported last night, the town has seen tremendous economic growth because of recent natural gas discoveries in the Marcellus and Utica shale formations. Hydraulic fracturing – a technology that has been used commercially for more than 60 years – allows companies to access the abundant natural gas resources located beneath the Steubenville area.

This “natural gas revolution” has already brought 300 jobs to the Steubenville area, and ABC News reports that 10,000 jobs are expected in the next three years. These jobs are high-paying, with some workers earning up to $77,000 per year. Shops, restaurants and hotels are now bustling.

Manufacturers, users of approximately one-third of the energy consumed in the United States, strongly support the use of hydraulic fracturing to access our nation’s abundant supply of natural gas. We use natural gas not only as a source of electricity, but as a feedstock for products such as plastics, fertilizer and pharmaceuticals. Affordable natural gas provides manufacturers with the ability to expand their facilities, increase production and create even more jobs. It is critically important that the states and the federal government not stand in the way of our access to these valuable resources.

Watch the story here:

Ohio Town Sees Jobs Turnaround

Yesterday the Department of Energy’s (DOE) Natural Gas Subcommittee released its interim report which makes recommendations to the Secretary regarding the safety and environmental performance of hydraulic fracturing from shale formations. The final report is expected in November of this year and the public will be given a chance to comment.

The preliminary report recognizes that “natural gas is a cornerstone of the U.S. economy, providing a quarter of the country’s total energy.”  It also acknowledges that technologies used in extracting natural gas from shale formations have increased production by 30 percent. What does all this mean? It’s very simple; it means more domestic jobs, stronger economy, lower natural gas prices and greater energy security.

In a Bloomberg story that ran today on new possible regulations for the shale industry, it would seem that the Director of the Bureau of Land Management may seem eager to issue potentially burdensome regulations on the industry.  

Do we need to make sure we extract shale gas responsibly and safely, yes! Can the states do a good job of regulating shale gas production? Yes they can.  States have been doing it for 150 years, 4.3 million wells, and by the way, most of the natural gas wells involve some form of hydraulic fracturing. Companies are continuing to work to improve the process, technology and implement the best practices possible.

It is critical to the global competitiveness of manufacturers and job creation in our country that we are able to utilize all the sources of energy available. We can’t afford to lock any of it away. Shale gas can provide much of our country’s natural gas needs. If the federal government is put in charge of regulating shale gas production then I have already seen this movie and it doesn’t end well. Let’s not go down the path of limiting what energy sources we will use, but let’s pursue a course of utilizing all of our sources which will help lead to lower energy costs and economic growth. 

Chip Yost is vice president for energy and resources policy, National Association of Manufacturers.

The Department of Energy’s (DOE) Natural Gas Subcommittee released a draft report on August 11 that makes recommendations regarding the safety and environmental performance of hydraulic fracturing from shale formations. Manufacturers, users of one-third of the energy consumed in the United States, agree with the Subcommittee’s characterization of natural gas as “a cornerstone of the U.S. economy.”  Unfortunately, the call for increased regulation of hydraulic fracturing is a reason for concern.

The Subcommitee’s recommendations include:

•  Required disclosure of all chemicals in hydraulic fracturing fluid – Many companies that manufacture this fluid voluntarily disclose the chemicals they use through the Frac Focus registry. Additional mandatory disclosure requirements may discourage manufacturers from developing new fluids if they know that competitors can easily find their exact “recipe.”
• New air emission standards – Comprehensive Environmental Protection Agency (EPA) rules are already in place or are in the process of being revised. Additional regulation would be redundant, confusing, expensive and unnecessary.
• Reduction in the usage of diesel engines at fracturing sites – This sweeping recommendation does not take into consideration that there may be no economically viable alternative to using a diesel engine at some wells.

Hydraulic fracturing is a critical process that has allowed the U.S. to take advantage of its rich shale gas resources. The majority of natural gas wells have used hydraulic fracturing, and there have been 4.3 million wells drilled in North America over 150 years. Current state regulations have been effective in protecting the environment. Manufacturers urge caution as the DOE moves forward with its final recommendations – additional federal regulations could put the brakes on a technology that is creating jobs and providing more affordable energy for all Americans.

The White House is promoting President Obama’s visit to the Youngstown, Ohio, manufacturer of steel tubing, V & M Ohio, as demonstrating the value of last year’s stimulus legislation. Fair enough, but V & M’s expansion would not be happening without the development of the Marcellus Shale’s natural gas, one of the great energy stories happening today.

Thanks to technological advances in hydraulic fracturing and directional drilling, and private-sector investment, the Marcellus Shale is producing wealth and jobs.

As The Cleveland Plain-Dealer reports, “President Obama’s destination: A Youngstown-area steel plant expanding with stimulus help“:

V&M is a subsidiary of Vallourec SA, a large European steel maker. The Plain Dealer described the expansion in February, saying the company plans to enter the growing market for small diameter steel tubes used to extract natural gas from shale deposits across the United States. To do that, the company is building a new factory next door to its existing facility in Youngstown that already employs about 500.

The new facility, which will be more than 1 million square-feet, will be above what used to be a mining operation.

Vallourec chose Youngtown, in part, because its in the middle of one of the largest shale formations in the world, called the Marcellus basin, and puts the company in close proximity to its potential customers. The deposit of brittle sedimentary rock, which contains a huge source of untapped natural gas, follows the path of the Appalachian mountains across New York, western Pennylvania, eastern Ohio, down to Maryland and West Virginia

The Marcellus Shale Coalition has a website with background, news and commentary on the development of this natural resources, including a report explaining hydraulic fracturing – the injection of high-pressure fluids into the shale formation to release the gas. On Wednesday, the coalition is holding a news conference in Duquesne, Pa.:

[Local] natural gas, steel manufacturing and transportation industry leaders will join elected officials to discuss to the positive and growing impact that responsible Marcellus Shale gas development is having on the region. Jointly hosted by the United States Steel Corporation (USS) and the Marcellus Shale Coalition (MSC), the event will focus on the extensive supply-chain network involved in producing this abundant, homegrown, clean-burning energy resource and its economic benefits throughout the region.

Good luck!

The House Energy and Natural Resources Committee, Subcommittee on Energy and Mineral Resources, holds a hearing Thursday, “Unconventional Fuels, Part I: Shale Gas Potential.” Shale gas is natural gas, and there’s nothing unconventional about that energy source.

Relatively new, however, is the effective and remarkable expansion of U.S. domestic natural gas resources made possible through technological advances, in this case hydraulic fracturing, or hydro-frac, the process of pumping pressurized liquids into gas-bearing shale deposits to fracture the stratum and release the gas.

Some environmental groups and other activist outfits like Propublica have targeted hydraulic fractioning, claiming it harms the environment. You’ll hear some of that criticism from witnesses tomorrow.

Fortunately, there are several witnesses who can bring real-world experience to the discussion, including Mike John, a vice president with Chesapeake Energy Corp., a global leader in natural gas development. John represents the company’s eastern region, which is where a lot of action is under way with the Marcellus Shale.

Also testifying is Lynn Helms, director of the Oil and Gas Division, North Dakota Industrial Commission. Helms has been a key state regulator and smart observer as hydrofrac has been used to develop the Bakken Formation, an oil-bearing shale formation in North Dakota, Montana and Saskatchewan. The technological advances represented by hydrofrac and horizontal drilling have helped make billions more barrels of oil available for drilling  — creating a much-welcomed energy boom in the prairies. (Lynn testified last year before a Senate Budget Committee hearing on the Bakken Formation.)

The American Petroleum Institute has developed many resources on hydraulic fracturing at its API website here, including a Q&A.

Our view is that if anyone claims to want “energy independence” or “energy security” and then attacks the new technologies that make more domestic natural gas and oil available, they’re just not very serious.

Gov. David Paterson (D-NY) this week signed a bill to update the state’s laws governing oil and gas drilling, at the same time making sure that the public knew his Administration was going to be vigilant about environmental consequences. (News release.)

The broadly supported legislation addresses spacing units and setback requirements and is intended to encourage and/or rationalize horizontal drilling and hydraulic fracturing, key processes for developing the Marcellus Shale’s natural gas deposits. The question now becomes whether the Paterson Administration will carry out the regulatory implementation and oversight with the intention of making the law work or will be so sensitive to environmental activists, advocacy journalism and political pressure as to sabotage the energy development (and Upstate’s economy) in the process.

One has to give the administration the benefit of the doubt, but there’s still cause for concern. In an interview on the public radio station WNYC, Paterson’s deputy secretary for the environment, Judith Enck, laid out a series of regulatory requirements, monitoring and controls, reasonable enough sounding, and, you bet, bet attention to water quality is critical. But in saying that the companies must disclose all the chemicals being used in the drilling process and other comments, Enck seems to buy into the thesis of drilling’s opponents and their allies in media outfits like WNYC and ProPublica, advocacy that produces banner headlines like the Albany Times-Union’s: 

Upstate New York’s looming natural gas nightmare

Regulators asleep as lawmmakers attempt to declare vast acreage open to the energy industry’s iffy underground fracturing technique

Or today’s headline, “Paterson approves law on risky gas drilling”

Iffy underground fracturing technique? Risky gas drilling? Good grief. May look that way from an Albany newsroom or the Upper West Side of Manhattan, but …good grief. From a very good API briefing/fact sheet on hydrofracking:

 

Application of hydraulic fracturing techniques, to increase oil and gas recovery, is estimated to account for 30 percent of U.S. recoverable oil and gas reserves and has been responsible for the addition of more than 7 billion barrels of oil and 600 trillion cubic feet of natural gas to meet the nation’s energy needs.

 

So iffy it accounts for 30 percent of U.S. oil and gas production.

Maybe we’re overreacting, but we’ve seen far too many examples of activists helping to generate media reports, which are then seized by the activists to generate even more media reports, which alarm the alarmable politicians, who propose more regulations that damage the economy but satisfy their core voters so everybody’s happy except why is my heating bill so high?

If enough obstacles can be thrown up in New York to hamper development of the Marcellus Shale’s great potential, then that “success” will be used to try to stop natural gas production throughout the Appalachian States. And energy security will be ever further away.