Energy Advocates Worry New EPA Fracking Rules Will Raise Costs, Reduce Production

April 20, 2012

The Western Energy Alliance says the new Obama Administration rule will impose a whopping $745 million in new costs

DENVER–The Environmental Protection Agency’s first-ever air-quality standards for hydraulic fracturing went over like a lead balloon with Colorado energy advocates.

Released Wednesday, the much-anticipated EPA regulations limit air pollution levels from natural-gas wells, which will require companies to install emissions-reducing equipment at the wellhead. The rules are scheduled to take effect January 2015.

An initial draft of the rules would have required companies to comply with the new standards as soon as they were finalized, but industry officials had pushed for a delay, arguing that the technology was not readily available.

EPA administrator Lisa Jackson said the regulations would protect the nation’s air quality from harmful pollutants that escape during the production process without hampering natural-gas development.

“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,” said Jackson in a statement.

EPA officials trumpeted the regulations as cost-effective, estimating that the rules will result in $11 to $19 million in annual savings for the natural-gas industry by capturing emissions that are now escaping into the atmosphere.

Industry officials were unimpressed, pointing out that complying with the regulations is expected to far exceed any potential savings from captured gas.

“Only a federal agency far removed from real-world economics and on-the-ground conditions could say with a straight face that a regulation is cost effective when it has $745 million in costs and only $11-19 million in benefits,” said Kathleen Sgamma, vice-president of government and public affairs for the Western Energy Alliance in Denver.

“Even with that disparity, we believe EPA seriously overestimated the benefits and underestimated the costs of compliance,” she said in a statement.

Environmental groups applauded the regulations, which limit the emissions of volatile organic compound, methane and toxic air pollutants such as benzene. At the same time, environmentalists took issue with the more than two-year delay, calling it unnecessary.

“Today’s announcement by the EPA is a major step forward,” said Earthjustice in a statement. “However, the two-and-a-half-year delay in reducing pollution from wellheads is an unnecessary setback because industry can meet those standards now. The environmental community is committed to working with EPA to strengthen the public health and air quality safeguards to protect families who live near existing fracking sites.”

The newly released regulations were the result of a settlement between the EPA and environmental groups after they sued in 2009 for updated rules under the Clean Air Act. The groups, WildEarth Guardians and the San Juan Citizens Alliance, were represented by Earthjustice attorneys.

“With our clean air literally being fracked away across the nation, these rules promise to safeguard our communities and keep the dirty process of drilling in check,” said WildEarth Guardians climate and energy program director Jeremy Nichols. “Although we are disappointed that the EPA may condone wasteful drilling, on the whole, this is a win-win plan that protects people and promotes responsible energy development.”

WildEarth Guardians has come under criticism for using the Equal Access to Justice Act to fund its environmental lawsuits with taxpayer dollars. In 2010, 41 percent of the group’s revenue came from federal funding in the form of grants and reimbursed legal fees, according to a January report by Americans for Prosperity-Colorado.

Sgamma argued that the EPA had overstepped its authority, saying that the latest rule “continues to be about circumventing Congress and using the Clean Air Act to regulate greenhouse gas emissions and global warming.”

Colorado’s emissions and air-quality rules, in particular those governing the oil and gas industry, are viewed as some of most stringent in the nation. Industry officials worry that ramping them up to meet the latest EPA mandate is likely to drive up production costs and energy prices for consumers.

“The new EPA air regulations will increase the air permitting requirements for the oil and gas industry,” said Doug Flanders, director of policy and external affairs for the Colorado Oil and Gas Association in a statement. “Our industry is committed to a continual process of reducing our air emissions. The new rule was a complicated rulemaking with many moving parts and as such industry need to thoroughly review the final rule to fully understand its impacts.”

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