DOE Report Recommends Fed Takeover of Shale Gas Regulation

Uncle SamIn early May, the federal Department of Energy (DOE), under the direction of DOE Secretary Steven Chu, assembled a panel of seven experts to create a list of industry “best practices” for shale gas drillers (see MDN story here). Known as the Shale Gas Subcommittee of the Secretary of Energy Advisory Board (SEAB), the group was charged with producing an initial report in 90 days that will identify immediate steps “to improve the safety and environmental performance of hydraulic fracturing.” That first report was released today (a full copy is embedded below).

The report says in the Executive Summary:

This 90-day report presents recommendations that if implemented will reduce the environmental impacts from shale gas production. The Subcommittee stresses the importance of a process of continuous improvement in the various aspects of shale gas production that relies on best practices and is tied to measurement and disclosure. While many companies are following such a process, much-broader and more extensive adoption is warranted. The approach benefits all parties in shale gas production: regulators will have more complete and accurate information; industry will achieve more efficient operations; and the public will see continuous, measurable improvement in shale gas activities.

MDN’s interpretation of the above paragraph: Some companies are doing it right, but others are not, and we think a heavy-handed top-down approach that forces everyone to follow our rules is the best solution. Bottom line: Get ready for the federal government to start interfering in states’ business. The federal government is building a case, via this report and no doubt the second report due from the Subcommittee in another 90 days, for a federal takeover of regulations for oil and gas drilling, instead of letting states oversee what is their constitutional right to oversee.

Interestingly, the Subcommittee seems to anticipate the reaction of MDN and others and makes this statement on page 11 of the report:

It is not within the scope of the Subcommittee’s 90-day report to make recommendations about the proper regulatory roles for state and federal governments. However, the Subcommittee emphasizes that effective and capable regulation is essential to protect the public interest. The challenges of protecting human health and the environment in light of the anticipated rapid expansion of shale gas production require the joint efforts of state and federal regulators. This means that resources dedicated to oversight of the industry must be sufficient to do the job and that there is adequate regulatory staff at the state and federal level with the technical expertise to issue, inspect, and enforce regulations. Fees, royalty payments and severance taxes are appropriate sources of funds to finance these needed regulatory activities.

This is double-speak. The only way the recommendations they make can be implemented will be under federal legislation, i.e. a federal takeover of the oversight of hydraulic fracturing and of oil and gas drilling in general. That is what this report recommends without saying so explicitly.

There are some good recommendations and observations in the report. But those recommendations should be for the states to decide when, how and if they should be done within their borders—not for Washington to legislate and force on the states.

Among the recommendations the report says should be adopted post haste:

  • Create a new national database of information on all aspects of shale gas drilling, force everyone to contribute information to it.
  • Force states to join and support ($) the private, not-for-profit organization STRONGER (the State Review of Oil and Natural Gas Environmental Regulation) so that this private organization can pass judgment on their government regulatory programs.
  • Force drillers to install expensive new air emissions monitoring equipment.
  • Force drillers to adopt a water tracking system to track every drop from the point they pick it up to the point it’s finally disposed.
  • The Subcommittee doesn’t like diesel engines for whatever reason, so if drillers use diesel engines to operate equipment at the drilling site, they should get rid of them in favor of natural gas engines or electricity.

The list goes on. You can read it yourself below in the 41-page report.