For the first time in a U.S. presidential election, natural gas and the process of its extraction, hydraulic fracturing, became a contentious topic between candidates. For years, U.S. leaders have promoted development within the domestic oil and gas industry to enhance energy stability. The world faces an alarming climate crisis, due in part, to the expansive use of fossil fuels. Given the urgency of the situation, how can the U.S. government promote sustainable energy within the near future? This Note suggests that the federal government, through its influential capacity within the commercial marketplace, should utilize natural gas over other fossil fuels and impose legislative mandates that enforce compliance and promote sustainable best practices within the natural gas industry. Because natural gas is extracted primarily through a process called hydraulic fracturing, the scope of this Note examines the costs and benefits associated with this practice in particular.
For the first time in a U.S. presidential election, issues surrounding the oil and gas industry took center stage in 2020. Traditionally, the issue of oil and gas generally plays a small role in presidential politics, aside from the price the average consumer pays at the pump. However, in 2020, with gas prices exceedingly low due in part to the COVID-19 pandemic, the issue of oil and gas had nothing to do with prices at gas stations. Instead, the main issue focused on hydraulic fracturing (commonly known as “fracking”), and whether or not a Biden administration would ban the practice.
What is fracking and why is it so important? Near the turn of the 21st century, technical developments in natural gas drilling revived the petrochemicals industry by tapping into previously unobtainable natural gas reserves that significantly increased production. This new process, known as hydraulic fracturing, made natural gas a strategic asset and enhanced overall stability within the U.S. economy. Natural gas comprises thirty-two percent of the country’s total energy consumption according to the U.S. Energy Information Administration (EIA), playing a critical role in fueling the country’s domestic infrastructure.
The expanded production of natural gas within the United States over the past twenty years has created energy independence and stability, and has enhanced U.S. national security. But with significant benefits come substantial risks. The extraction of natural gas through hydraulic fracturing results in adverse environmental consequences, from water contamination to induced seismicity. For example, in Dimock, Pennsylvania, “faulty cement and steel barriers” in a hydraulic fracturing well caused methane and dangerous chemicals to seep into ground-water aquifers, forcing residents of the rural town to deal with flaming tap water and contaminated soil.
Despite these serious environmental concerns, there remains little to no federal regulation over hydraulic fracturing. Neither Congress nor the Environmental Protection Agency (EPA) have issued guidance on behalf of the federal government. In fact, many environmental laws, such as the Energy Policy Act of 2005 (EPAct) and the Safe Drinking Water Act (SDWA), explicitly exempt fracturing from compliance. Consequently, state governments are left to regulate hydraulic fracturing. Although state-based solutions offer the necessary guidance to address local conditions, the variety of legal standards create inconsistency for implementation and enforcement of the law. Many scholars agree there is a need for federal governance to promote uniformity in the natural gas industry due to aforementioned environmental, national security, and economic implications. However, developing a federal regulatory solution has proved to be a daunting task. Some scholars promote a “cooperative federalism” framework, where the federal and state governments work together. Others seek to strike a balance between public governance on behalf of the federal government and private industry standard-setting. These approaches, although pragmatic, show no sign of being implemented in the near future.
As humanity faces an imminent climate crisis, action must be taken to promote sustainable development. To encourage sustainable best-practices and curb adverse environmental side-effects, the federal government can promote socially-responsible environmental policies through its purchasing power in the commercial marketplace. The U.S. government procures immense amounts of oil through both civilian and defense contracts; however, the government should shift the focus of energy procurement from oil to natural gas. In doing so, the government can encourage sustainable energy where current regulations fall short by promoting the acquisition of natural gas from environmentally responsible contractors. By embodying this concept within a legislative mandate, the government should utilize and enforce a new Federal Acquisition Regulation (FAR) provision requiring contractors to disclose their environmental practices and adhere to best practice within the natural gas industry at large.
Part II of this Note provides a comprehensive background that situates hydraulic fracturing in the energy sector at large, explains the technical processes utilized in hydraulic fracturing to form a better understanding of associated benefits and risks, and identifies the nexus between natural gas and government procurement. Part III examines the current regulatory scheme over the natural gas industry and addresses comprehensive solutions proposed by scholars at the federal level. Finally, Part IV suggests that promoting energy sustainability in the natural gas industry through procuring natural gas over oil should be done by mandating environmental best practices within the FAR.
The first commercial oil well was drilled in 1859. Over time, engineers advanced drilling methods to access rich oil and gas deposits deep below the earth’s surface. By the turn of the twenty-first century, energy companies developed a new drilling technique that combined hydraulic fracturing and horizontal drilling. This unconventional natural gas drilling, known generally as hydraulic fracturing, led gas companies to profit from previously unobtainable shale gas reserves.
Hydraulic fracturing begins with drilling vertically, six to ten thousand feet below the earth’s surface, and then turning the drill horizontally in order to increase the well’s contact with gas-rich rock formations. Next, substantial “fracturing fluid” is pumped into the formations at high pressure to crack, or “fracture,” the rock and release gas trapped inside. The fracturing fluid consists of water, sand, and/or chemicals to stabilize the cracks, allow continuous flow of gas through the well, and prevent bacteria from degrading the gas. Then, the fracturing fluid is brought back above ground, leaving the mixture of sand and chemicals to preserve the newly formed cracks. This remaining “wastewater” contains “high levels of total dissolved solids [], naturally occurring radioactive materials, fracking fluid additives, and metals.”
Natural gas derived from hydraulic fracturing offers environmental, national security, and economic benefits that, if implemented correctly, will provide sustainable energy for the future.
Most notably, natural gas provides a cleaner and cheaper alternative to other fossil fuels. Due to the increased consumption of natural gas, U.S. GHG emissions have dropped substantially in the past fifteen years. From 2005 to 2017, a U.S. EIA study revealed coal-related and petroleum-related carbon dioxide (CO2) emissions fell thirty-nine percent and eleven percent respectively. During that same period, natural gas emissions increased by twenty-four percent, lowering overall net GHG emissions.
Although burning natural gas may lower GHG emissions, the production of natural gas (e.g. drilling or pipeline leaks) may release methane into the atmosphere, yielding much higher emission levels. Scholars debate the “lifecycle” effects of natural gas by weighing the consumption and production over other fossil fuels, but studies seem to favor the overall benefit of using natural gas. For its part, the EPA has found that gas production “emits only slightly more methane into the atmosphere than livestock.” The significant benefit of decreasing GHG emissions by using natural gas over other fossil fuels present yet another incentive for the federal government to promote sustainable development within the natural gas industry.
For generations, the United States has emphasized the need for energy independence to pacify national security concerns. Increasing domestic production of natural gas decreases the United States’ reliance on foreign sources of energy, thereby increasing its geopolitical power. Traditionally, top oil exporting nations, including Saudi Arabia, Russia, China, Iraq, Iran, Kuwait, and the United Arab Emirates, have either been unstable or hostile towards the United States. As political tensions continue between these actors and the United States, the U.S. government has an incentive to promote sustainable energy development within the domestic natural gas industry to stabilize national security.
Additionally, natural gas produces long-term economic security by offering an affordable fuel alternative. Transportation accounts for approximately one-third of total energy consumption in the United States. As oil prices continue to increase, “cheap natural gas can have even greater impact over the long term by replacing [oil] for cars, trucks and buses.”
Furthermore, studies show that growth in the natural gas and oil industry leads to substantial job development. In 2015, the industry sustained 10.3 million jobs, which was a five percent increase from 2011, and contributed $1.3 trillion to the U.S. national economy. While some hydraulic fracturing companies cut back on total jobs in the past year due to drops in revenue, the industry’s overall impact on the economy is undeniable.
Significant benefits derived from the fracturing industry must be examined in context with the associated risks, which adversely impact the environment. Fracturing causes risks akin to conventional drilling, but imposes additional hazards related to water contamination and usage. First, because natural gas presents a cheaper and cleaner fossil fuel alternative, it creates less incentive to promote renewable energy sources and “undercut[s] the political support for renewable fuel mandates.” Renewable energy sources, like solar, wind, and biofuels, present a plethora of positive attributes and should not be ignored when considering directives for sustainable energy development.
Second, natural gas production can adversely contribute to air pollution. Drilling wells and pipeline leaks can release methane and fluid evaporation can release volatile organic compounds (VOCs). Deep drilling expends “naturally occurring radioactive materials,” which could impose health risks to drill workers and local communities. Trucks used to transport supplies necessary for well construction contribute to GHG emissions, augmenting the adverse environmental impact of drilling sites at large.
Third, hydraulic fracturing can induce tremors and minor earthquakes as a result of injecting fluids across small spatial areas. While research indicates that induced seismicity may be insignificant, it has also raised enough concern to implement regulatory reform in Ohio and Arkansas. Although, seismic activity may be infrequent, “[t]here is greater potential for earthquakes from disposal of spent fracturing fluid in injection wells” in comparison to traditional oil and gas drilling.
Finally, hydraulic fracturing uniquely presents additional environmental harm through its water usage and contamination. Hydraulic fracturing uses immense amounts of water: “a single well uses [two] to [four] million gallons” of water. This water, mixed with sand and chemicals, may contaminate groundwater. Although the layer of fractured shale “is usually thousands of feet below the water table,” contamination can still occur in “surface spills of fracturing fluid, improper handling of waste products, and migration of natural gas into water wells.” Additionally, fracturing fluid, which contains partial amounts of toxic chemicals, can directly permeate water sources through faulty well construction, cracked well casings, and blowouts in the well structure. Lastly, “[t]he disposal of [wastewater] used during the [fracturing] process is one of the most troubling aspects of any frack job” due to the limited methods of removal.
Proponents of hydraulic fracturing minimize these risks by citing to a 2004 EPA study that stated, “the injection of hydraulic fracturing fluids into [coalbed methane] wells pose[d] little or no threat to [underground sources of drinking water] and [did] not justify additional study at [that] time.” However, a whistleblower within the agency claimed the study was “scientifically unsound” and the research was “limited.” Yet this study, combined with the political power retained by oil and gas companies, led to explicit carve-outs in federal environmental regulation that exempt oil and gas companies from many environmental compliance standards.
The United States depends on the energy sector because it enhances the national security, economic security, and public health of the nation. “Primary energy sources include fossil fuels (petroleum, natural gas, and coal), nuclear energy, and renewable sources of energy” including wind, biofuels, wood, and solar. In 2018, natural gas accounted for thirty-one percent of the United States total energy consumption and production. Within the next twenty-five years, estimates expect natural gas to become the primary energy source to replace oil, as reserves decrease and prices increase.
The United States consumes more natural gas than any other country in the world. In 2019, the United States consumed 817.1 billion cubic meters of natural gas. In contrast, the Russian Federation, the second-largest purchaser, consumed 454.5 billion cubic meters, which again demonstrates the United States’ significant role in the natural gas industry. The U.S. military alone annually consumes more natural gas than most countries. Understanding the vital role natural gas plays in our society, both now and for the future, accentuates the growing need to promote sustainable practices in the industry.
The nexus between government contracts and natural gas is a unique relationship within public procurement. This section identifies the interplay between key agencies that procure natural gas, the relevant FAR provisions governing environmental policies, and the use of preferences within government contracts.
The United States consumes more natural gas than any other country in the world. In particular, the U.S. government procures immense quantities of natural gas to fulfill its needs, which range from critical military requirements to basic utilities. The EPA, the Department of Energy (DoE), and the Department of Interior (DoI) regulate the natural gas industry, while two principal agencies procure substantial amounts of natural gas: the Department of Defense (DoD) and the General Services Administration (GSA).
DoD procures energy through the Defense Logistics Agency Energy (DLA Energy). Within DLA, Installation Energy is the “central procurement agency for direct supply natural gas.” Installation Energy seeks to maximize both the value and efficiency of acquiring natural gas and other energy sources for the government. DLA Energy adheres to standard government contracting regulations, like the Federal Acquisition Streamlining Act (FASA) and the FAR, when procuring a variety of energy commodities.
GSA uses a particular contract vehicle, called GSA Areawide Public Utility Contracts, where federal agencies may procure public utilities, including natural gas. Federal agencies create the contract by “signing an [order form] that details the utility service or project to be provided under the Areawide Contract. The Areawide Contract encompasses the general terms and conditions of the agreement, while the [order form] details the specific [utility] services to be provided to the Ordering Agency.” More simply, GSA provides a master contract that other federal agencies may order from to acquire various utilities. Similar to DoD, GSA also adheres to standard government contracting laws and regulations.
Because the aforementioned executive agencies procure natural gas, the FAR governs those contracts. Generally, FAR Part 23 encompasses the federal rules and polices related to sustainable environmental acquisition by “protecting and improving the quality of the environment” and “foster[ing] markets for sustainable technologies, materials, products, and services.” Sustainability refers to the interplay between social and welfare needs, economic opportunity, and “environmental limits imposed by supporting ecosystems.” FAR Part 23 imposes a mandatory obligation upon executive agencies to advance sustainable acquisition by procuring goods and services that meet specific environmental standards, such as products that are water efficient or non-ozone depleting. These policies seek to develop programs that “promote and implement cost-effective waste reduction.”
Various subparts within FAR Part 23 cover comprehensive and detailed policies to promote environmental sustainability. FAR Part 23.2, Energy and Water Efficiency and Renewable Energy, incorporates various mandates and preferences for domestic procurements. These regulations promote policy that enhances “[the] Nation’s energy security, safeguards the health of our environment, and reduces greenhouse gas emissions from direct and indirect Federal activities.” FAR Part 23.8 promotes programs that minimize the depletion of stratospheric ozone by giving preference to acceptable alternatives. FAR Part 23.10 details requirements pertaining to contractor disclosure of emergency planning and toxic release at federal facilities. Collectively, FAR Part 23 illustrates the federal government’s commitment to promoting sustainable procurement through various mandates, disclosures, and preferences within government contracts.
As discussed above, FAR Part 23 lists numerous preferences for sustainable acquisitions. A core tenant of government contracts is to further social welfare policies mandated by Congress. In order to successfully implement these initiatives, the FAR directs agencies to use set-asides and preferences. A contract set-aside reserves the contract for a particular type of entity (such as a small business) by preferring them over other contractors, so long as they meet certain criteria. Consequently, a contract set-aside is a contract-based initiative because it is dependent on each individual procurement. For example, “[t]he small business set-aside is the most common socioeconomic program. It restricts, or ‘sets aside,’ contracts exclusively for small business participation.” Critics claim contract set-asides conflict with a core pillar in government contracting, competition, because a they restricts contracts to particular contractors. However, Congress has balanced the promotion of social welfare against these concerns by mandating that set-asides be given to traditionally impaired businesses, like women-owned small business, economically disadvantaged women-owned small businesses, and service-disabled veteran-owned small businesses.
In addition to set-asides, the government may assert particular preferences through evaluation criteria or policy mandates. In negotiated procurements, the government uses its evaluation criteria to determine which proposal provides the best value. Each evaluation criterion is tailored to each acquisition. These evaluations are given rates, weights, and rankings, so contractors understand what to emphasize in their proposals. By placing more value with certain evaluation criteria, the government creates a preference for contractors who meet such standards. Preferences may also be given through policy mandates. For example, FAR Part 23.802(b) imposes a preference for products that reduce overall risk to human health and environmental impact. Collectively, preferences can incentivize contractors to meet or adhere to specific criteria in order to increase their chances of being awarded a contract.
This section will examine the current regulatory scheme for the natural gas industry by comparing federal and state environmental regulations of hydraulic fracturing. Understanding these regulations not only helps identify the issues that plague the current system, but also leads to a discussion of potential solutions.
State governments predominately regulate hydraulic fracturing. State regulatory commissions impose best-practice regulations, enforce these regulations, and grant permits to drill wells. State law may be better equipped to regulate the industry because fracturing operations are dependent on specific physical environments; however, differentiations among states’ definition of what constitutes a violation of environmental law results in varying enforcement actions. The immense “scale of the nationwide gas boom” from hydraulic fracturing suggests regulations should be promulgated at the federal level.
Additionally, local communities tend to have little authority in regulating the construction of hydraulic fracturing wells. Hydraulic fracturing companies obtain permits from the state government to conduct drilling operations “wherever they deem it reasonably necessary, provided the methods used and surface are reasonable.” Because these permits operate under state law, which preempts local law, many communities are left with little to no redress regarding the size and location of hydraulic wells.
Currently, federal regulations of hydraulic fracturing are virtually nonexistent. Congress and the EPA have largely chosen to exempt oil and gas companies from many of the environmental regulatory requirements within the current scheme. These exemptions hinder the ability of local municipalities and the federal government to regulate the natural gas industry over environmental issues and health concerns to promote best practices.
Specifically, the EPAct exempts oil and gas companies from significant environmental regulations. The EPAct carved out oil and gas industry protections in the National Environmental Policy Act (NEPA), which mandates agencies produce an environmental impact statement before taking action that could seriously affect the environment. The EPAct also included an amendment to the SDWA that explicitly excluded fracturing fluid injection from the Underground Injection Control Program, “which regulates the operation of underground injection wells through a permitting scheme.” Similarly, oil and gas construction activities are exempt from the Clean Water Act’s permitting scheme regulating storm water runoff. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), which creates a federal “superfund” to clean up hazardous-waste site spills and accidents, likewise excludes natural gas from the definition of “hazardous waste.”
These exemptions also extend to numerous other federal laws. Politicians rationalized the carve-outs exempting oil and gas companies from flagship environmental regulations by citing to a report released by the EPA in 2004 that claimed fracturing operations minimally affected the environment. However, facts and circumstances suggested otherwise. Oil and gas companies held significant lobbying power and industry influence over politicians at the time of the EPAct. Specifically, Vice President Dick Cheney, who was in office during the passage of the EPAct, also happened to be the former CEO of Halliburton, a massive oil and gas company with substantial interests in hydraulic fracturing. To illustrate the nexus between industry influence and the explicit statutory exemptions, the regulatory gap is colloquially referred to as the “Halliburton Loophole.”
The pervasiveness of these legal loopholes has not gone unseen. In 2015, Congress considered the Fracturing Responsibility and Awareness of Chemicals Act (FRAC), which sought to revoke the exemption given to oil and gas companies under the SDWA. The bill died and was reintroduced in 2017, but no further developments have occurred.
Natural gas imposes immense benefits for future energy sustainability, but only if implemented appropriately. Unfortunately, the current federal regulatory scheme lacks any substance to adequately incentivize sustainable behavior within the natural gas industry.
Evidently, the current regulatory scheme surrounding natural gas is complex, yet ineffective. What should be done to mend the current regulatory scheme in the wake of a global climate crisis? Existing literature examines this question by looking to both public and private governance through the traditional lens of legislative and administrative law. Yet, when examining public environmental governance at large, scholars have recognized public procurement as an effective tool for enforcing sustainable regulations.
When considering how to implement an effective environmental regulatory scheme, scholars typically conduct a comparative analysis between public and private governance, at both the state and federal levels. Public governance refers to laws and regulations promulgated by the government to promote “openness, balance, and accountability.” Conversely, private governance refers to industry standards and best practices set forth by private industry to promote innovation and flexibility. However, the specific context of the natural gas industry and hydraulic fracturing creates a significant gap in public governance, which makes it unclear as to how public regulations and private industry standards should work together.
A notable solution to close the gap in the natural gas industry between public and private environmental governance is the implementation of a “cooperative federalism” regime. Cooperative federalism generally operates by the federal government setting a standard that is enforced by the states, and when necessary, the federal government steps in if states fail to implement the regulations. Professor Amanda Leiter suggests the federal government could set standards requiring the natural gas industry to disclose well drilling information and water usage and treatment. Although the idea of cooperative federalism is in theory a beneficial relationship between federal, state, and private actors, it presents little affirmative incentive for private industry to promote or enhance sustainability standards.
The lack of regulation of the natural gas industry causes issues surrounding governance between the state and federal governments, and disincentivizes environmental compliance within the natural gas industry. To resolve these issues, this Note proposes that the federal government utilize government contracts as a public governance tool to compel environmental compliance and impose sustainable best practices upon the natural gas industry through FAR clauses.
The scholarship identifying public governance solutions to address the lack of federal environmental regulation over hydraulic fracturing generally looks through the traditional lens of legislative and administrative law. However, current scholarship fails to consider a critical and pervasive type of public governance: public procurement. Since Congress enacted the Administrative Procedure Act in 1946, public procurement “has been and can be employed as a device for the accomplishment, implementation or even formulation of important national policies and goals, as a sophisticated technique for public administration as well as procurement.”
The U.S. procurement system centers around three distinct goals: competition, transparency, and integrity. These goals come into tension with underlying principles such as efficiency, customer satisfaction, best value, wealth distribution, risk avoidance, and uniformity. The interplay between these goals and principles is exemplified by the axiom that “government spending can influence behaviour and infuse growth in communities and economic sectors.” For example, government contracts promote wealth redistribution by mandating that the U.S. government acquire goods and services through small business set-asides. Likewise, public procurement promotes the purchase of environmentally sustainable products. The role, purpose, and general principles of public procurement within the United States show that public contracts can provide a sufficient and effective form of public governance and administration.
Moreover, government procurement should mend the gaps within existing federal statutory schemes and incentivize contractors to comply with higher environmental standards, because public contracts already mirror private environmental governance techniques, such as green supply chains. Specifically, public procurement favors sustainable environmental policies by encouraging contractors to adopt best practices that mandate or prefer products or services with certain environmental and sustainable characteristics. The lucrative opportunity for industry to contract with the federal government creates a demand-side pressure sufficient enough to necessitate change in industry behavior.
Professor Jason Czarnezki refers to this as Green Public Procurement (GPP), or a regulatory mechanism to encourage “environmental norm change in public and private actors.” Specifically, the government should “take the environment into account when procuring goods, services or works for all stages of a product including life cycle of the procured goods, providing industry with real incentives for developing greener products and technologies.” By emphasizing the life cycle cost offered by sustainable products, the government can advance collateral goals, such as promoting human health or preserving non-renewable resources, while acquiring products and services that yield more “best value” to the government.
Professor Amy Stein illustrates this concept by proposing that the U.S. government can promote sustainable electricity and fuels derived from renewable energy sources through its purchasing power. Because the U.S. government is the largest consumer of energy in the world and can influence private actors through contractual obligations, she posits that the government should support sustainable energy through the procurement of renewable sources, thereby deriving greater, long-term benefits. Evidently, these public polices and private initiatives share a common goal, and the U.S. government should work with industry to effectively enforce environmental compliance.
The FAR governs federal procurement by executive agencies in the United States. Although the FAR already promotes environmental best practices, it should be expanded to include hydraulic fracturing as a means to incentivize contractors to be more environmentally responsible if they want to contract with the government. Specifically, Congress should enact legislation requiring the Federal Acquisition Regulatory Council (FAR Council) to promulgate a specific FAR subpart addressing environmental compliance among natural gas contractors, especially those contractors that use hydraulic fracturing as a means of extraction.
The proposed FAR subpart should be implemented under FAR Part 23. FAR Part 23 advances sustainable acquisition through policies directed at efficient water usage, depletion of GHG emissions, and transparent pollution requirements. Thus, implementing procurement policy that affects the natural gas industry aligns with the overall scope of FAR Part 23 because the adverse environmental impact of natural gas drilling implicates water usage, GHG emissions, and various other pollution concerns. The proposed subpart should include a clause requiring contractors to disclose environmental practices and procedures that relate to the construction and drilling of wells, water usage, and wastewater disposal. Additionally, another clause should be included to mandate that supplies and processes used during fracturing operations support environmental best practices.
To develop best practices within the industry, it is important to recognize and address potential risk pathways. Environmental risks arise in hydraulic fracturing due to 1) “mismanagement of wastewater,” 2) “inadequate well construction,” and 3) the migration of fracturing fluid to wells. To minimize these risks, natural gas companies should decrease chemical usage and use on-site physical containments for waste. Additionally, these companies should consistently communicate with local authorities to perform site characterization analyses, identify and monitor water locations near the drilling sites, and maintain contingency plans for accidents. By developing a similar series of standards within the proposed subpart, the federal government could effectively enhance the quality of the environment by requiring that prospective fracturing contractors adhere to these standards.
In accordance with FAR drafting principles, the FAR subpart should be crafted to include appropriate “Scope,” “Applicability,” “Definitions,” “Policy,” and “Contract Clause.” The following illustrates a possible draft change to the FAR:
Subpart 23.12 – Enhancing Environmental Responsibility in the Natural Gas Industry
23.12000 Scope. This subpart prescribes policies and procedures for obtaining information needed for Government –
(a) Compliance with environmentally responsible practices relating to natural gas extraction; and
(b) Implementation of sustainable best practices through hydraulic fracturing operations; and
(c) Addresses public discourse relating to hydraulic fracturing and sustainable energy goals.
23.12001 Applicability. This subpart applies to all solicitations and contracts for natural gas.
23.12002 Definitions. As used in this subpart –
“Federal agency” means an executive agency.
“Hydraulic fracturing” means a process that involves both vertical and horizontal drilling to extract underground resources from a geologic formation by injecting water, a propping agent, and chemical additives into a well under enough pressure to fracture the geological formation in order to extract oil and/or natural gas.
23.12003 Policy. It is the policy of the Federal Government that Federal Agencies
(a) Shall procure natural gas with contractors who demonstrate a commitment to enhancing the environment through sustainable practices by
(1) Adhering to the Energy Policy Act of 2005, the Safe Water Drinking Act, and the Clean Water Act
(2) Seeking to reduce environmental impact as much as practicable; and
(b) Give preference to contractors with no environmental violations at either the state or federal level.
(c) Conduct environmental life-cycle assessments of energy acquisition to obtain best value for the government.
23.12004 Contract Clause. Insert the clause at 52.223-12, Procurement of Natural Gas Contracts, in solicitations and contracts.
52.223-12 Procurement of Natural Gas Contracts (Jan 2020).
(a) The Contractor shall disclose, in detail, the current practices and procedures used throughout the entire fracturing process. In addition, the Contractor shall present an environment impact statement relating to the current or proposed hydraulic fracturing operation used to extract the natural gas for the contract.
(b) The Contractor hereby agrees to use certified supplies and processes that promote environmental sustainability, during the duration of the contract, as it relates to natural gas extraction.
(c) In the event the Contractor faces an environmental violation of any kind during the performance of this contract, the Government reserves the right to terminate the contract for default.
The aforementioned proposed FAR subpart provides a general and workable standard for the government to analyze the practices of private contractors, in an effort to promote environmentally efficient standards. By forcing the contractor to disclose their practices and potential impact on the environment, it compels private industry to implement sustainable routines to increase their chances of winning a contract. Even though contractors may have to use more expensive supplies and materials when constructing natural gas rigs to meet environmental standards, the long-term benefit of sustaining the environment will outweigh any short-term costs.
Similarly, by preferring contractors with a history of environmental compliance, the proposed subpart enforces sustainable fracturing for operations outside the current procurement. The preference would operate as a competitive advantage during negotiated procurements. The proposed subpart’s corresponding contract clause also provides a remedy on behalf of the government in the event the contractor fails to maintain sustainable practices, thereby incentivizing environmental compliance. At the same time, the provision is written broadly to enable flexibility because hydraulic fracturing operations are dependent on the local environment. Together, these clauses would function as an outcome-based preference for environmentally sustainable contractors. Because suppliers of natural gas operate as big businesses with market-driven prices, there would be no shortage of competition for these federal contracts. The federal government already utilizes the procurement system as a means of public governance over the environmental sector. Adding another subpart that promotes the consumption of sustainable natural gas to FAR Part 23 would align with current procurement policy and yield long-term benefits by enhancing environmental sustainability.
A large gap exists in the federal regulatory scheme regarding environmental compliance among the natural gas and hydraulic fracturing industry. Specific exemptions relieve oil and gas companies from adhering to flagship environmental regulations, particularly in the EPAct and SDWA. This is concerning because natural gas and its extraction through hydraulic fracturing impose significant risks. Most notably, fracturing operations threaten the environment through the use of toxic chemicals and water depletion. With the climate crisis looming overhead, laws and regulations protecting the environment are of paramount importance.
Scholars attempted to fill the regulatory gap over the natural gas industry by suggesting traditional legislative and administrative remedies, at both the state and federal level, through combinations of public and private governance. Missing from this literature is the consideration of public procurement as a type of governance at the federal level. Public contracts are commonly used to influence private industry behavior, as the opportunity to contract with the government is highly valued. Indeed, the federal government already uses its procurement regulations to promote sustainable and environmentally efficient behavior. Therefore, it makes sense to consider public procurement as a viable solution to force environmental compliance among the natural gas industry. Although imposing compliance on contractors may result in increased costs, the overall benefit of promoting a sustainable natural gas industry outweighs the adverse consequences by sustaining resources, promoting public health, and strengthening national security.
The natural gas industry offers a viable and desirable energy alternative to oil. By replacing oil with natural gas and procuring more goods that promote a clean energy economy, the United States could significantly reduce its impact on the environment. Furthermore, substantial production of natural gas within the United States strengthens national security by reducing reliance on foreign sources for energy, and by bringing significant economic growth to many local communities across the country.
Because the U.S. government is the largest consumer of oil and gas in the world, it has the ability to maximize and promote these benefits. The U.S. government has a responsibility to promote sustainability to protect the welfare of its people. Climate change presents a real and imminent threat that will disrupt everyday life if something is not done soon. Fortunately, government contracts present a promising solution to this alarming problem by creating an enforcement mechanism, as well as monetary incentives to encourage environmentally sustainable energy production.
Subpart 23.12 – Enhancing Environmental Responsibility in the Natural Gas Industry
23.12000 Scope. This subpart prescribes policies and procedures for obtaining information needed for Government –
(a) Compliance with environmentally responsible practices relating to natural gas extraction; and
(b) Implementation of sustainable best practices through hydraulic fracturing operations; and
(c) Addresses public discourse relating to hydraulic fracturing and sustainable energy goals.
23.12001 Applicability. This subpart applies to all solicitations and contracts for natural gas.
23.12002 Definitions. As used in this subpart –
“Federal agency” means an executive agency.
“Hydraulic fracturing” means a process that involves both vertical and horizontal drilling to extract underground resources from a geologic formation by injecting water, a propping agent, and chemical additives into a well under enough pressure to fracture the geological formation in order to extract oil and/or natural gas.
23.12003 Policy. It is the policy of the Federal Government that Federal Agencies
(a) Shall procure natural gas with contractors who demonstrate a commitment to enhancing the environment through sustainable practices by
(1) Adhering to the Energy Policy Act of 2005, the Safe Water Drinking Act, and the Clean Water Act
(2) Seeking to reduce environmental impact as much as practicable; and
(b) Give preference to contractors with no environmental violations at either the state or federal level.
(c) Conduct environmental life-cycle assessments of energy acquisition to obtain best value for the government.
23.12004 Contract Clause. Insert the clause at 52.223-12, Procurement of Natural Gas Contracts, in solicitations and contracts.
52.223-12 Procurement of Natural Gas Contracts (Apr 2020).
(a) The Contractor shall disclose, in detail, the current practices and procedures used throughout the entire fracturing process. In addition, the Contractor shall present an environment impact statement relating to the current or proposed hydraulic fracturing operation used to extract the natural gas for the contract.
(b) The Contractor hereby agrees to use certified supplies and process that promote environmental sustainability, during the duration of the contract, as it relates to natural gas extraction.
(c) In the event the Contractor faces an environmental violation of any kind during the performance of this contract, the Government reserves the right to terminate the contract for default.
