Washington urged to get more input from states, industry

Federal regulators contemplating proposals involving unconventional oil and gas production should pursue a meaningful partnership with states and the industry to prevent duplicative and confusing requirements, two Democrats from the US Senate Energy and Natural Resources Committee suggested.

Otherwise, they run the risk of stifling significant economic growth and improved energy security with burdensome, inefficient regulations, Sens. Ronald L. Wyden (Ore.) and Joe Manchin (W.Va.) said during a Mar. 20 National Journal-American Chemistry Council policy summit on finding the best regulatory environment to boost responsible US natural gas production.

State input is essential because geography can vary dramatically, Wyden maintained. States have responded quickly to challenges posed by new production using technology to tap previously inaccessible resources, and the federal government needs to catch up with similar approaches on land that it manages, he said.

“Sometimes, the [US Environmental Protection Agency] is not in sync with what needs to be done,” Manchin added. “All we’re asking for is a partnership. Fears of EPA or the Army Corps of Engineers potentially shutting down an operation by denying it a permit can stifle investment. West Virginia regulators aren’t ever certain of EPA’s plans.”

Wyden said he thinks methane emissions from unconventional gas production sites are a real issue. “But I think EPA could work with states the way I worked with colleagues on both sides of the [Senate] aisle on the industrial boiler issue,” he continued. “EPA clearly had more work to do when it issued its original proposal. It said so, but the courts wouldn’t give it more time. Our bill did, and EPA, to its credit, tried to get it right. It’s not perfect yet, but it’s better than it was.”

Pursue clean coal

Manchin said West Virginia wants to work with EPA to find cleaner ways to use coal for electric power generation so more gas would be freed for transportation and other direct uses. Several states already are aggressively converting vehicle fleets to run on compressed natural gas, he noted. “Gas should be affordable,” he said. “Manufacturers shouldn’t have to compete with electric utilities for economic supplies.”

The US energy resource outlook has changed so dramatically in the last few years that policymakers should declare time out to thoroughly study the situation, Wyden recommended. “We need to spend some time thinking this through and thinking, for example, how US chemical and other manufacturers compete with Japanese and other overseas companies which are willing to pay more gas,” he said.

“Our decisions affect thousands of peoples’ lives,” Manchin said. “We have an advantage now. We should use it.”

Several hours later, US Sen. Lisa Murkowski (R-Alas.), the Energy and Natural Resources Committee’s ranking minority member, told reporters that the federal government seems to be trying harder to work with Alaskans and their state government on developing offshore oil and gas resources there.

She said Shell Offshore Co. is beginning to move equipment north—in “a pretty extraordinary deployment”—in anticipation of starting work this summer on its federal leases in the Beaufort and Chukchi Seas. “I’m more optimistic this year than I was last year,” Murkowski said.

Federal coordination

Murkowski said US Sec. of the Interior Ken Salazar deserves credit for getting President Barack Obama to form an interagency team headed by Deputy Interior Sec. David J. Hayes to coordinate federal efforts involving the National Petroleum Reserve-Alaska as well as offshore federal acreage.

“It seems there are so many different ways now to stop oil and gas projects,” Murkowski said. “Lawsuits are the new normal up north, so I give the secretary credit for his effort. It may not be a model we can apply across-the-board, but we should move ahead where it’s working.”

Wyden recalled that a relatively recent rush to approve LNG import terminals—before the domestic unconventional gas potential was recognized—in which the US Federal Energy Regulatory Commission’s use of eminent domain and the US Department of Energy’s declarations that the proposed projects were in the national interest seemed to trump state and local concerns.

“Proposals to construct pipelines and terminals always create contention in states,” Manchin said. “FERC needs to set up ways for counties and local governments to share the benefits if they’re being asked to bear the costs.”

Wyden said, “What we have now is bedlam. Eminent domain isn’t doing the job. If we don’t start thinking this through, there will be constant questions.”

Contact Nick Snow at nicks@pennwell.com.

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