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EPA Backs Off Investigations, Delays Frack Rules

Capping off a string of regulatory actions that have been favorable to the oil and natural gas industry -- and somewhat embarrassing to the Environmental Protection Agency (EPA) -- the regulator last week delayed the release of final air pollution standards for hydraulic fracturing (fracking).

The EPA was due to issue final rules last Tuesday (April 3), but the deadline has been extended to April 17, according to a consent order filed in U.S. District Court for the District of Columbia. The agency said it sought the additional time to consider the issues raised in the more than 156,000 public comments that it received on its proposal to reduce air pollution from oil and gas drilling, with particular attention paid to shale development practices, such as fracking.

"We heard from the White House that OMB [Office of Management and Budget] wanted EPA to change a few things in the final rule," said a spokesman for an industry association, who wished to remain anonymous. He did not know what changes were requested.

Lee Fuller, vice president of government relations for the Independent Petroleum Association of America (IPAA), also weighed in on the recent events. "The federal government couldn't finish all of the paperwork [associated with] the changes" in the final rule," he told NGI.

Fuller wouldn't go so far as to call the delay of the air pollution standards positive for the oil and gas industry, but he said two long-running cases in which the EPA recently has had to retract its allegations against producers on water issues have been "favorable because they've [EPA] been terribly embarrassed." In a third dispute the EPA has agreed to a joint review with state officials.

In all three cases the EPA had been pitted against state regulators who claimed jurisdiction. On March 30, the EPA withdrew its "imminent and substantial endangerment order" that it had issued in December 2010 against Range Resources for alleged contamination of water wells in the Texas Barnett Shale (see NGI, April 2).

In mid-March after several years of on-again-off-again investigations, the EPA concluded that test results of water samples taken from households in Dimock Township, PA, did not indicate any level of contamination from wells drilled by Cabot Oil & Gas (see NGI, March 19).

And in early March EPA Administrator Lisa Jackson agreed to cooperate in a joint review of a controversial report with state officials of earlier EPA testing that found the groundwater in Pavillion, WY, contained chemicals normally used in natural gas production practices .

In its investigation of alleged problems in the Barnett Shale the agency pursued a nasty confrontation with the Texas Railroad Commission (RRC), which had state officials calling for the firing of the EPA division chief in charge. The RRC said its own investigation had found that methane in the water wells had come from a gas-bearing formation other than the one targeted by Range ((see NGI, March 28, 2011).

In Wyoming the governor got involved, pursuing further investigations by a joint state-federal panel after Encana Corp. disputed EPA draft report findings on contaminants in ground water near its wells (see NGI, Dec. 21, 2011). Gov. Matt Mead and Wyoming legislators further lay claim to the issue, passing a bill that would provide state funding for a long-term water solution for residents outside of Pavillion.

"It wasn't Range Resources causing the methane [contamination] in the water wells. It turned out they [EPA officials] were dead wrong," Fuller said. Similarly, "in Pavillion and Dimock...they found industry at fault, but when they analyzed the data, they discovered [it] really wasn't the case...In the last month they've had egg on their faces three times."

The EPA "has had a pattern of desperately hunting down some incidents that justify federalization of the oil and gas industry," Fuller said. And these trio of cases were part of that pattern.

The industry association spokesman who wished to remain anonymous said he believes the EPA "bit off more than they could chew...They tend to do too much too fast." He pointed out that the three cases involved water contamination, not air pollution, and conceded that the EPA may become more cautious on the issue of water contamination as a result. It appears "to be taking a step back to make sure its ducks are in a row, make sure it has the facts straight before it accuses [anyone] of contaminating water."

In comments filed on the proposed air pollution standards in late 2011, industry representatives, including the American Gas Association, American Petroleum Institute (API), America's Natural Gas Alliance and IPAA, recommended dozens of modifications to the proposed rulemaking, including changes to many of the definitions used in the agency's proposal. The API also raised the possibility of challenging the air pollution rules (see NGI, Dec. 5, 2011).

More recently, in a letter sent to the White House last Wednesday, the API called on the Obama administration to make five key changes to the rule to ensure that it "does not chill domestic production" including:

Fuller said the rule overestimates the amount of gas released during fracking that has to be regulated. Moreover, the rule would apply to all fracked natural gas wells, regardless of the technology used for fracking, he said.

If changes are not made, producers contend that shale development would be significantly scaled back. The API estimates that overall drilling for gas using fracking stimulation would be reduced by up to 52% by 2015, or by as much as 21,400 wells. Natural gas production from fracked wells would decline by up to 11% compared to what would otherwise be developed, according to the institute.

The EPA issued its proposed air pollution standards in late July. Industry groups called the proposed air emission standards to be imposed an "overreach" and urged the EPA to rethink its plans. Like the API, the Marcellus Shale Coalition (MSC) at the time warned that the standards could stifle natural gas production, which could promote the use of other less-clean energy sources.

The air emissions regulations are a result of a consent decree stemming from a federal lawsuit brought forth by two groups -- based in New Mexico and Colorado -- opposed to the "responsible development" of American natural gas, according to the industry.

"While we understand that EPA is required by law to periodically evaluate current standards, this sweeping set of potentially unworkable regulations represents an overreach that could, ironically, undercut the production of American natural gas, an abundant energy resource that is critical to strengthening our nation's air quality," said MSC President Kathryn Klaber.

In related news last week Democratic lawmakers on the House Energy and Commerce Committee called on EPA Administrator Lisa Jackson to consider the results of a recent study on the health effects of air emissions from fracking in its review of fracking risks.

"We ask that you consider a new study from the Colorado School of Public Health (CSPH) that raises concerns about the potential public health impact of air emissions from unconventional gas drilling operations," wrote Rep. Henry Waxman of California, the ranking Democrat on the committee; and Rep. Diana DeGette of Colorado, the ranking Democrat on the committee's Subcommittee on Oversight and Investigations.

"Our data show that it is important to include air pollution in the national dialogue on natural gas development that has focused largely on water exposures to hydraulic fracturing," said Lisa McKenzie, lead author of the study and research associate at the CSPH. The EPA review of the potential health effects of fracking was initiated in March 2010 (see Daily GPI, March 19, 2010).

The report, which focused on residents living about a half-mile from the wells, was in response to the rapid expansion of natural gas development in rural Garfield County in western Colorado. Garfield County had asked the Colorado School of Public Health to assess the potential health impact of the wells on the community of Battlement Mesa, which has a population of about 5,000.

Scientists at the Colorado school reviewed three years of air monitoring data in Garfield County, and found that residents living near natural gas wells may face increased exposure to benzene, a known human carcinogen, and other toxic chemicals, such as ethylbenzene, toluene and xylene, they said. The results of the study were released in mid-March. The researchers concluded that there are higher lifetime cancer risks for people living closer to the wells, according to Waxman and DeGette. They also found that these nearby residents have a higher risk of neurological and respiratory health effects.

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