Energy Industry Threatens Water Quality, Sways Congress with Misleading Data
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Nancy Johnson did not return calls for comment and the Department of Energy's office of fossil energy did not make its officials available for an interview after repeated requests. It said, through a spokesperson, that the Department did not author the report.
Godec also produced a similar report on costs and state gas regulations for the Independent Petroleum Association of America that was published in late April. Titled "Bringing Real Information on Energy Forward," (PDF) that report also makes the case that state regulations of drilling practices are effective. Godec says his company’s work is impartial and his conclusions would have been the same whether he was contracted by the oil and gas industry, or the federal government.
Even if the costs Godec laid out in the DOE report were up-to-date and accurate, it’s doubtful they would have the devastating financial impact the industry claims.
The estimated expense of regulating hydraulic fracturing amounts to between one and three percent of the total cost of drilling a new well when factored into operating costs estimated by financial analysts at Deutsche Bank. If all the testing that Godec includes is factored out, the regulations would cost the industry just $4,500 per well, according to his report, or just six hundredths of a percent of the cost of establishing a typical new well.
“I think at the end of the day it’s unlikely to have a real huge impact,” says John Freeman, a senior vice president for energy equity research at the investment bank Raymond James. “It’s a lot of fuzzy stuff that I can’t get my hands around. This just seems to be more of a soft number that I frankly have more of a hard time connecting the dots on.”
State Regulations Leave Gaps
In May the Ground Water Protection Council, a group made up mostly of industry representatives and state oil and gas regulators, released the first comprehensive review (PDF) of oil and gas regulations across 27 of 31 drilling states it surveyed. The report, paid for by the DOE, concluded that most states have requirements to encase wells in cement and protect groundwater, and that a majority also require they be notified after hydraulic fracturing takes place.
"The study confirms what the industry has been saying (PDF): that regulation of oil and gas field activities, including hydraulic fracturing, is best accomplished at the state level," the American Petroleum Institute said a press release about the study.
But the GWPC report -- which focuses on what regulations are in place, rather than what may be missing -- raises important points that are downplayed in its summary. It reveals that regulatory oversight is inconsistent from state to state and has substantial gaps. It also says hydraulic fracturing requires "comprehensive" further study "to determine the relative risk" and to determine best practices.
In fact, the report calls for some of same measures found in the congressional bill the industry is so hotly contesting.
See where states stand on regulating oil and gas.
Regarding fracturing in areas close to the surface or near shallow aquifers, the report reads: "States should consider requiring companies to submit a list of additives used in formation fracturing and their concentration." It also says that shallow fracturing very close to certain drinking water aquifers "should either be stopped, or restricted to the use of materials that do not pose a risk of endangering ground water and do not have the potential to cause human health effects."
A close examination of the appendices (PDF) attached to the research also showed that 21 of the 31 states listed do not have any specific regulation addressing hydraulic fracturing; 17 states do not require companies to list the chemicals they put in the ground; and no state requires companies to track how much drilling fluid they pump into or remove from the earth -- crucial data for determining what portion of chemicals has been discarded underground.