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EPA Nipping at the Heels of Shale Gas Producers

Natural gas is winning the energy race but the competition is on its heels. While coal, nuclear and green fuels would like to catch it, its chief rival appears to be the environmental groups that want it to invest in safer drilling technologies.

At issue are the production methods used to extract shale gas, which is located a mile beneath the earth’s surface. Concerns exist on a number of fronts that include the release of methane gases, which are shorter-lived than that of carbon dioxide but that are considered to be much more potent. As such, the U.S. Environmental Protection Agency has issued new rules to minimize such leaks.

Some shale gas producers say it is better to acquiesce than to suffer a public backlash, especially if the methane could be captured and later sold. Others, though, are more hesitant. They are concerned about the cost of compliance but will nonetheless review meticulously EPA’s “complicated” rule.

EPA will take public comment for 60 days but after the regs are enacted, natural gas drillers will have three years to comply. Producers could burn, or flare, their methane releases, although they could also buy new equipment that would capture the leaks. Those gases could then be resold in the market. 

A Cornell University study last year concluded that total greenhouse gases over 20 years as a result of exploring for shale are at least 20 percent greater -- possibly as much as double -- when compared to those of coal. That’s because natural gas is composed mostly of methane, which may have the ability to dissipate but is still capable of trapping more heat than carbon dioxide.

“By ensuring the capture of gases that were previously released to pollute our air and threaten our climate, these updated standards will not only protect our health but also lead to more product for fuel suppliers to bring to market,” says EPA Administrator Lisa Jackson.

In a separate move, the White House issued an executive order that streamlines the federal review process when it comes to oversight of natural gas activities. Specifically, President Obama says that his administration supports “safe and responsible unconventional domestic natural gas development” but that air and water quality would not be sacrificed in a shale-dominated energy economy. 

Greater Transparency

Consider that shale gas in 2008 comprised about 11 percent of all natural gas production. But by 2010, that number jumped to 27 percent and by 2015, it will be 43 percent. That’s according to IHS Global Insight, which says that by 2035 shale will amount to 60 percent of all natural gas production.

EPA says that such prominence requires more of its attention. Specifically, it wants to cut volatile organic compounds, or smog levels, by 25 percent. But the EPA says that would be done by using proven technologies that can capture natural gas that currently escapes into the air -- gas that would be made available for sale. It goes on to say that this would result in an additional $30 million annually in sales for the natural gas industry -- more than enough to compensate the developers.

A high profile advisory board to the U.S. Department of Energy reported last fall that shale gas development can live up to its expectations, both economically and environmentally. It said that greater openness would give regulators more accurate and complete information. The public, meantime, would be assured that it is seeing continuous and measured improvement in the drilling methods being used.

“One of the starting points is the need for much more complete measurement of water quality, air quality, and specifically methane,” says Daniel Yergin, who was on the advisory board, in testimony. “Many of the recommendations focus on best practices and technical innovation. They also emphasize the importance of community engagement and the need for disclosure and transparency. They recognize the central role of state regulation in this arena.”

Several environmental groups are unconvinced. They are pointing to an examination done in February by the National Oceanic and Atmospheric Administration. It is showing that air samples in Colorado that are near fracking wells contained twice the levels of methane that EPA had expected, or about a 4 percent leakage rate. The Natural Resources Defense Council insists that fracking must be postponed until drillers can demonstrate that it is always safely done. 

The energy race is not yet decided. But if shale gas developers want to maintain their current advantage, they will need to make key investments in the tools that can capture methane leaks. Otherwise, EPA will come down hard and the environmentalists will overtake them.

EnergyBiz Insider is the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Twitter: @Ken_Silverstein

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