API Study: New EPA Emissions Rules Will Cut Drilling 52%

If proposed new EPA air emissions regulations go into effect later this year as proposed, the number of wells drilled using hydraulic fracturing will drop by half, according to a study commissioned and just released by the American Petroleum Institute (a copy of the study is embedded below). The Obama administration has given lip service support for shale gas drilling, most notably in Obama’s recent State of the Union speech—but the administration’s actions don’t match their words.

According to the study, the new EPA regulations would result in an 11 percent drop in gas production, and a 37 percent drop in domestic oil production. The federal government will also receive $8.5 billion less in royalty payments from reduced drilling.

The API press release announcing the study’s findings:

The New Source Performance Standards for oil and natural gas production proposed by the Environmental Protection Agency (EPA) would significantly slowdown drilling, resulting in less oil and natural gas production, lower royalties to the federal government, and lower tax payments to state governments, according to a new study funded by the American Petroleum Institute.

“EPA needs to fix these rules in a way that they’ll reduce emissions but not impede oil and natural gas development, which creates jobs and government revenue and improves our energy security,” said Howard Feldman, API director of scientific and regulatory affairs.

The study – by Advanced Resources International – shows that the regulations as proposed 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. As a result, the federal government would not collect up to $8.5 billion dollars in royalties and state governments would not collect up to $2.3 billion in severance taxes due to reduced drilling and production.

Feldman asked the EPA to avoid the one-size-fits-all approach for emissions completions; to allow more time to implement the requirements; and to streamline the compliance and recordkeeping requirements.

“Natural gas prices are half what they were three years ago because of the shale boom, and this is benefiting consumers and businesses,” Feldman said. “At a time when the government is desperate for revenue, and America’s fuel prices are high, applying overly burdensome regulations would be bad public policy and could place an even bigger burden on Americans in the form of higher energy costs.

API represents more than 500 oil and natural gas companies, leaders of a technology-driven industry that supplies most of America’s energy, supports 9.2 million U.S. jobs and 7.7 percent of the U.S. economy, delivers more than $86 million a day in revenue to our government, and, since 2000, has invested more than $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives.*

*American Petroleum Institute (Mar 15, 2012) – Study: EPA air emissions rules could cause substantial slowdown in drilling, reduced revenue to government