Subtraction Through Addition via the FRAC Act

Desperate for something to advocate for on visits with friendly legislators during periodic trips to Capitol Hill, opponents of natural gas were able to secure the introduction of legislation a couple years back called the FRAC Act – legislation that seeks to wrestle regulatory control over hydraulic fracturing from the states and place it firmly in the purview of the U.S. EPA under the Safe Drinking Water Act.

That SDWA has been the law of the land for nearly 40 years and was never written, and has never been used, to regulate hydraulic fracturing is, for opponents, merely an inconvenience; granting regulatory authority to the EPA means another layer of bureaucracy through which oil and gas operators would have to navigate, which in turn means a slowdown if not an outright halt in development. The FRAC Act has become something of an obsession for folks opposed to responsible shale development, with none other than Josh Fox using it as the main “thing to do” after he misled the public with Gasland just a few years back.

Even though the FRAC Act has gained exactly zero traction in the U.S. Congress (even Henry Waxman intervened to stop its advance back in 2010) two U.S. Senators – Barbara Boxer (D-Calif.) and Bernie Sanders (I-Vt.) – have nonetheless tried to bring it to life by including the full text of the act as part of a bigger carbon tax bill. That’s what makes a recent report by the Hudson Institute, entitled “Institutional Choices for Regulating Oil and Gas Wells,” incredibly timely, as the report makes it abundantly clear why this proposal is a less than stellar idea.

Of course, before even discussing whether the federal government should insert itself into this conversation, it’s worth asking: Are state regulators failing to meet their responsibilities? After all, if it’s not broken don’t fix it.  According to officials at the EPA – the agency that opponents so desperately want to regulate hydraulic fracturing – there is no indication that state regulation isn’t adequate. As former EPA Administrator Lisa Jackson recently observed: “States are stepping up and doing a good job,” which of course came not long after EPA’s Drinking Water Protection Division chief said he has “no information that states aren’t doing a good job already” regulating hydraulic fracturing.

With that as background, the Hudson Institute study presented four fundamental questions often used to determine the appropriate level of regulation for any activity:

  • Do any potential environmental problems involve large trans-border effects?
  • Would uniform standards protect large network or scale economies in the affected industry?
  • Which level of government is likely to possess better information?
  • And is the federal government more attentive to the public welfare than the states are?

In considering the above, the study found “these considerations imply that state-level control [of hydraulic fracturing] is a superior option” and that “given current evidence, the case for the FRAC Act is weak.” Here’s why:

The first question wasn’t very difficult to answer. Hydraulic fracturing has been applied more than 1.2 million times since 1947 and has compiled an exceptional record of safety and execution during that span. This is a fact confirmed by state regulators, multiple independent reviews and the U.S. EPA under three separate administrations. In addition, a recent Massachusetts Institute of Technology study noted that natural gas development from shale produces results in dramatically lower air emissions than other studies have acknowledged.  And we’d obviously be remiss if we didn’t note that natural gas produced from shale is enabling the United States to lead the world in carbon emissions reductions.  This is a trans-border effect that even the most ardent opponent of natural gas development should relish — if such opponents were actually interested in reducing emissions.

On to the second question: Would the natural gas industry and environment would benefit from a uniform set of regulatory standards on hydraulic fracturing? Uniform standards may sound nice in the abstract, but the realities of shale demonstrate otherwise. From the study: “The complex nexus of economic and environmental issues involved with oil and natural gas exploration and production are likely to frustrate efforts like the FRAC Act to impose simple sweeping schemes.” It added that a uniform regulatory scheme for oil and natural gas development “is likely to be very badly wrong in most or all specific cases” due to the “vast disparities among major natural gas plays that further magnify the case for decentralized control and diverse standards.”

Of course, these concerns apply whether states or the federal government are more likely to possess better information and thus implement a more effective regulatory program. In addressing that third fundamental question, the study notes that shale basins and even individual oil and gas wells are so unique that it would be virtually impossible for the federal government to fully understand the scope of information required to implement a successful regulatory regime. This is especially the case given funding and staffing limitations.  The study lists just a few of these unique considerations including:

 …geology, hydrology, and climate differ greatly from one shale basin to another. Some shale plays are actually in metropolitan areas; others are far from population centers. In some basins, water is plentiful; in some it is scarce. Water laws are diverse; so is the quality of local infrastructure and the demands it must satisfy.

Finally, as for attentiveness to public welfare, the study noted that “the demands on EPA resources would escalate rapidly” and, unless funding kept pace (an extremely unlikely scenario, especially given the current budget environment), “both the quality of the permitting process and the growth of economic output would be bound to suffer.” That’s right: placing control in EPA’s hands would actually create more of a burden for the agency itself than it would be able to handle! But that’s probably what opponents want: an agency so overwhelmed that it has to stop issuing permits altogether.

Which brings us to the potential hidden motives in the legislation.  While supporters of the FRAC Act declare the bill is simply a means of achieving greater chemical disclosure (which is already happening at the state level, mind you; see, the Hudson Institute recognizes a much more nefarious result: Placing regulatory authority under SDWA would make the whole process subject to “citizen suits” authorized under section 1449, which would “unleash a torrent of litigation” that “would both retard operations and chill innovation” by providing a “hunting license for any interest group seeking a pretext for litigation.”  The study notes the likelihood of this occurring is quite high given ideological opponents of shale, like the Sierra Club, would be provided an open door to “unfettered legal obstructionism” that “entails high risk of snarling [natural gas development] in regulatory and legal gridlock.”

Of course, that would mean destroying the millions of jobs, increased economic competitiveness and the opportunity for the United States to achieve greater energy independence – but ideological opponents of responsible shale development have never much cared about those details.

Taken together, the study’s findings demonstrate why former Colorado governor Bill Ritter (D) called the FRAC Act a “new and potentially intrusive regulatory program” back when it was first introduced in 2009 (back then, the entire bill came in at fewer than 45 words; today, it reads more like a press release than genuine legislation). The study also paints a pretty clear picture as to why the act has failed to advance in two separate sessions of Congress under both Democratic and Republican leadership: It’s just a really awful piece of legislation.

However, none of these details seemed to matter to Sens. Boxer and Sanders. By knowingly including legislative language that could grind to a halt the very technology responsible for our nation’s precipitous drop in carbon emissions, two U.S. senators have completed a rather impressive feat: Introducing a bill that is both designed to cut greenhouse gas emissions and prevent deployment of the technologies necessary to achieve those reductions.

So, in the end, it appears the only thing the FRAC Act would achieve is to cripple the U.S. economy, reverse a nearly half-decade long trend of falling CO2 emissions, and undermine production of what President Obama himself called “clean power” in his recent State of the Union address. Only in Washington could this possibly make sense.



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