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New EPA Regulations On Fracking

This past Wednesday, the EPA released new regulations on hydraulic fracturing (“fracking”). Surprisingly, the 588 pages of regulations don’t amount to much. At best, they codify existing industry practices. At worst, they might cause delays and other unintended consequences.

The new regulations focus on “green completions” (“completions” refers to the whole well-stimulation process, including fracking). Immediately after a well is fracked, the mixture that flows back up to the surface includes water, sand, natural gas, and other hydrocarbons. Conventional equipment cannot handle the abrasive sand—because it erodes the metal components—so companies let the mixture flow into a plastic-lined pit until the sand concentration is low enough to use the conventional equipment. What the EPA and environmentalists don’t like about this process, is that while the well is flowing to the lined-pit, the gas is escaping into the air rather than going into a pipeline.

Green completions use special equipment that can filter out the sand before the mixture goes into the conventional equipment. This way, companies can separate out the natural gas and flow it into the pipeline from the very beginning.

Before these regulations, half of all completions were already using green completion technology, primarily as a way to capture and sell more of the gas. The percentage of green completions was also, undeniably, trending upward. So why the need for EPA regulations when companies were already making these changes on their own?

The concerns that gave rise to these new regulations were emissions of volatile organic compounds (VOCs), benzene, and methane in the initial, uncaptured flow of gas. These are natural hydrocarbons and components of natural gas, i.e. they are not chemicals additives from fracking fluids (sometimes benzene is added to fracking fluids, but most benzene emissions result from the natural gas itself).

VOCs are a concern because they are SMOG precursors. SMOG is a respiratory irritant, so it can increase incidences of asthma, and cause other problems, but only at high concentrations. SMOG was first identified in Los Angeles in the 1950s, because it was so bad that people could literally see a brownish haze set over the city. But how bad is SMOG today? From 1970 to 1990 the installation of catalytic converters in cars reduced smog-forming tailpipe emissions by 99%. Consequently, when people compare SMOG caused by oil and gas activity to that from cars—as was done recently in a an article in the Dallas Morning News—they fail to realize that cars are no longer a major source of SMOG forming emissions. So, while oil and gas development does result in SMOG levels comparable to that from urban traffic, that does not suggest dangerous levels of SMOG.

Likewise, the reductions in benzene would have a minimal effect on improving health, given the ultra-low concentrations of benzene emissions, and the short-lived nature of these emissions. (for details on benzene see Fracking: Chemicals, Cancer, and Relative Risks).

While the benefits from these new regulations are likely to be elusive—and I do not support needless regulations—I must admit that they do not look terribly destructive. As already noted, many companies have already begun to do green completions.

One concern is that there may not be enough equipment available for green completions, which could cause delays or a bidding war that would drive up the prices beyond cost-effectiveness. However, the regulations do not go into effect until 2015, which should hopefully give enough time to manufacture more equipment.

Another possible problem is related to pipeline construction. When companies develop a field, they move quickly from one well to the next, in order to make the most efficient use of their drilling and fracking equipment. Sometimes, as a result, they outrun their pipeline installation crews. The pipeline, however, must be in place to do a green completion. Otherwise, there’s nowhere to put the captured gas. What companies usually do, in this case, is complete (“frack”) the well, flowback into the plastic-lined pit (for various technical reasons, flowback needs to happen right away), and then shut the well in (close the valve) until the pipeline is installed. With these new regulations, companies will have to precisely schedule their pipeline, drilling, and fracking operations. But even with the most precise scheduling, there will inevitably be delays. The regulations will compound the cost of these delays by requiring rented equipment (costing tens of thousands of dollars per day) to sit idle while pipelines catch up.

This brings me to my final criticism, common to many regulations: The one-size-fits-all approach. If it makes economic sense for a company to do a green completion (as the EPA suggests), it will do so—but under unique circumstances, such as the occasional delay, or in cases of difficult terrain, remote areas, or unique safety considerations, companies will no longer have the freedom to make intelligent well-by-well assessments of whether or not green completions make sense in a particular circumstance.

With a nation still struggling to find its way out of a recession, and a manufacturing boom fueled by cheap natural gas, why waste our efforts on needless and potentially damaging regulations? Even if the damage turns out to be small, the number of man-hours already spent drafting, reviewing, commenting on, and reading the 588 pages of regulation were, no doubt, a waste of human resources.