Natural gas and oil drilling could be slowed by the U.S. Environmental Protection Agency’s (EPA) proposed New Source Performance Standards, resulting in less production and royalties, according to a study funded by the American Petroleum Institute (API) that was released Friday.

Completed by Advanced Resources International, the study buttresses what API has been warning about the proposed regulations, namely that they would reduce drilling using hydraulic fracturing (fracking) by up to 52%, reduce natural gas production by up to 11% and reduce oil production by up to 37%. As a result, the federal government would lose up to $8.5 billion in royalties and states would lose about $2.3 billion in severance taxes, according to the study.

Using the study as ammunition, API’s Howard Feldman, director of scientific and regulatory affairs, urged EPA to avoid “a one-size-fits-all approach” for emissions standards, allow more time for implementation, and streamline compliance and record-keeping requirements.

“EPA needs to fix these rules in a way that they’ll reduce emissions but not impede oil and natural gas development that creates jobs and government revenue and improves our energy security,” Feldman said.

Separately, Moody’s Investors Service warned on Tuesday that refining and marketing companies in California face problems from the planned phased implementation of the state’s precedent-setting climate change law (AB 32), which is due to begin implementation next year. “California’s increasingly stringent environmental regulations will challenge refiners over the next decade, increasing operating costs and negatively impacting refined product demand,” said Gretchen French, Moody’s vice president.

Under AB 32, the California Air Resources Board (CARB) next year will begin enforcing a statewide cap on greenhouse gas emissions, which under current proposed plans is not feasible regulation, according to the Western States Petroleum Association (WSPA). “We’ve been telling CARB and anyone else who will listen that the combination of climate change regulations that will be hitting the refining sector in California in the next three or four years has the potential to be catastrophic,” WSPA spokesperson Tupper Hull told NGI. “Moody’s analysis was welcome but certainly not surprising to us.”

Similarly, the API study underscores the industry’s argument that there could be serious negative economic consequences from the proposed federal and California environmental regulations.

“Natural gas prices are half what they were three years ago because of the shale boom, and this is benefiting consumers and businesses,” Feldman said. “At a time when the government is desperate for revenue and America’s fuel prices are high, applying overly burdensome regulations would be bad public policy.”

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