Source: http://www.lexology.com, August 16, 2012
By: Cori C. Steinmann, Sedgwick LLP
Since the late 1990s, there has been a boom in natural gas and oil drilling across the United States. It is estimated that 13,000 new natural gas wells are drilled each year, or about 35 wells per day. According to the U.S. Energy Information Administration, shale natural gas will account for nearly half of the natural gas produced in the United States by 2035. However, as the fracking industry expands, so too does the regulatory oversight.
Developed more than 60 years ago, hydraulic fracturing, or fracking, involves injecting millions of gallons of water, sand and chemicals into deep shale formations at high pressures, which cracks the shale, freeing hydrocarbons. Natural gas burns cleaner than oil, gasoline or coal, although the fracking process itself still emits methane, benzene and hexane into the air. The Environmental Protection Agency (EPA) has been working since 2011 to develop the first national air pollution standards for the fracking industry. The Clean Air Act standards, which the EPA says will reduce natural gas emissions by 95 percent, will require natural gas well operators to use green completions to capture and treat the emissions that escape during the fracking process. However, due to the cost and shortage of this technology, the standards will not completely phase in until 2015. During the transition period, the emissions can be flared, or burned off, but by January 2015 all new fractured wells will be required to use green completions. The standards also allow for incentives to companies that employ green completions prior to the 2015 deadline, such as waiver of state permitting requirements. By requiring the gas to be captured and treated, the new standards will not only curb emissions, but will also save the industry an estimated $11 million to $19 million annually in gas that can be captured and sold.
And more regulation is likely to come.
Environmentalists argue that fracking can contaminate groundwater and cause earthquakes. The Obama Administration is already looking into these issues, as evidenced by the draft rules issued in May 2012. The proposed rules would require companies to report the chemicals used during the fracking process and set standards for building wells. Clearly, there will be more regulatory oversight of the fracking industry in the future, so stay tuned.