January 01, 2012

DOE’s Final Report On Shale Gas: Where Do We Go From Here?

Back in March 2011, with rising gas prices and a stagnant economy, President Obama responded to the seemingly annual energy crisis by delivering a national energy policy—the “Blueprint for a Secure Energy Future.” Beyond the expected nods to the development of clean energy sources and increased energy efficiency, the president explicitly acknowledged the growing phenomenon of American shale gas production and its importance to the nation’s economy, energy security, and environment. Specifically, the president’s Blueprint declared that the administration would take steps to assure that safety concerns relating to hydraulic fracturing practices would be addressed. This task was assigned to the Secretary of Energy Advisory Board (SEAB) which was directed to form a subcommittee on shale gas development and identify near-term actions and recommendations to federal agencies on improving the safety and environmental performance of hydraulic fracturing.

On November 10, 2011, the SEAB Shale Gas Production Subcommittee released its final 90-day report recommending twenty actions that the subcommittee believes “would assure that the nation’s considerable shale gas resources are being developed responsibly, in a way that protects human health and the environment and is most beneficial to the nation.” These recommendations—directed to federal agencies, states, and stakeholders—will now be transmitted to Secretary of Energy Stephen Chu who will then discuss them with the administrator of the U.S. Environmental Protection Agency (EPA) and with the Secretary of the U.S. Department of the Interior (DOI). With the U.S. Department of Energy (DOE) acknowledging that it has no regulatory authority over shale gas and thus no means of enforcing or acting upon these recommendations, the question on most people’s minds is: Where do we go from here?

As with many policy debates, the report’s importance may lie mainly in shaping public perception. Accordingly, it is helpful to review what the subcommittee says about some of the key issues relating to shale gas development. First, the final report states unequivocally that the subcommittee “shares the prevailing view that the risk of fracturing fluid leakage into drinking water sources through fractures made in deep shale reservoirs is remote.” This statement is important as it goes to the heart of what many consider to be a key environmental concern relating to hydraulic fracturing. Notably, in a public call presenting the final report to the SEAB, subcommittee Chairman John Deutch rejected an attempt to alter this statement by saying that the subcommittee had been presented with no evidence to refute this statement. 

With respect to the role of federal and state regulations, the final report recommends actions in both forums. On the federal side, the subcommittee recommends pending federal regulatory initiatives by EPA and DOI despite the subcommittee’s oft-repeated acknowledgment that decisions about federal regulatory policy were outside of its jurisdiction. With respect to EPA, the subcommittee “commends” the agency’s proposed emission standards for the oil and gas sector and suggests that the rule does not go far enough by failing to control methane emissions directly. The subcommittee also “urges the EPA to take action as appropriate” during the pendency of its study on the impact of hydraulic fracturing and drinking water. Finally, the subcommittee “welcomes” DOI’s announcement of new regulations requiring the disclosure of chemicals used in hydraulic fracturing on federal lands. 

Despite these nods to current federal regulatory actions, the subcommittee does, at least implicitly, recognize and support the idea of continued state regulation of shale development. One example of this support is the subcommittee’s recommendation for increased federal funding of the State Review of Oil and Natural Gas Environmental Regulations (STRONGER) and the Ground Water Protection Council (GWPC)—two non-profit organizations that assist states in evaluating their regulations. This funding recommendation for state regulators would seem to be less important if in fact the subcommittee favored the replacement of state regulation with top-down EPA regulation. A second example can be seen in the subcommittee’s recommendations relating to the development of “best practices” for reducing air pollution, well completion, and water use. In advocating for this effort, the subcommittee states that it “favors a national approach including regional mechanisms that recognize differences in geology, land use, water resources, and regulation.” This recognition is important for industry, as it acknowledges the fallacy of a “one-size-fits-all” federal regulatory approach.

Beyond its statements on some of the key issues facing shale development, perhaps the most important contribution of the subcommittee is the return of DOE to a national energy policy discussion that has mostly been dominated by EPA and the climate change office of the White House for the past three years. Within the federal government, DOE has the most historical knowledge relating to energy development and the innovations that have occurred in the natural gas industry. This knowledge can make DOE a productive and reliable voice within the Obama administration in favor of policies that will allow responsible shale gas development—and the associated economic, security, and environmental benefits—to go forward.