Environmental Red Tape Stalling Natural Gas Recovery

More than 30 environmental policy and regulatory impairments are stalling domestic natural gas production, according to the Department of Energy's (DOE) Energy Information Agency (EIA).

If the status quo is allowed to continue, EIA observes in its December 2004 report on Environmental Policy and Regulatory Constraints to Natural Gas Production, future shortages and price shocks will adversely affect the U.S. economy.

Conflicting Policies Cited

According to EIA, U.S. annual natural gas consumption will increase from 23 trillion cubic feet (TCF) in 2000 to 35 TCF in 2025. The new study notes environmental regulatory obstacles are making it difficult to increase natural gas production to keep pace with demand.

Ironically, the study reports, environmental activists are primarily responsible for the recent surge in natural gas demand. Activists in the 1990s demanded power plants shift from coal to cleaner-burning natural gas, the study notes. Now that power plants have done so, the same activist groups are mounting a campaign to limit natural gas exploration, production, and transportation. As a result, conflicting federal policies both promote and discourage production of natural gas.

"The federal government and environmental activists have encouraged increased use of natural gas, but at the same time are cracking down hard on efforts to expand natural gas supply," said Ben Lieberman, director of clean air policy at the Competitive Enterprise Institute. The EIA study makes the same point, noting, "Environmental and regulatory policy constraints, which were developed to meet national environmental protection goals, can, at the same time, limit natural gas exploration and production (E&P) and transportation.

"A status quo approach to these conflicting policies will result in undesirable impacts to consumers and the economy," the study warns.

Regulations Stymie Development

A lack of access to natural gas reserves is a major factor limiting natural gas recovery. Roughly 40 percent of U.S. natural gas reserves are currently off-limits for production. Lack of access, however, is only one of many impediments.

"Various other constraints, including laws, regulations, and implementation procedures, can limit natural gas development and production on both federal and private lands," states the report. "This report identifies and describes more than 30 environmental policy and regulatory impediments to domestic natural gas production.

"Recent studies have examined limitations to accessing natural gas, particularly in the Rocky Mountain region, but even after the gas is accessed, numerous additional environmental policy and regulatory constraints can affect production and delivery to consumers," the study noted.

Huge Sources Affected

Juxtaposed against current annual natural gas demand of 23 TCF per year, the amount of natural gas production affected by the environmental obstacles is striking. Here are just a few, according to the study, with appropriate quotes from the source:

• The Coastal Zone Management Act Consistency Provisions (CZMA) require that each federal agency activity that affects any land use, water use, or natural resource of the coastal zone must be undertaken in a manner consistent "to the maximum extent practicable" with the enforcement policies of approved state coastal management programs. "These provisions have caused duplications and costly delays to federal leasing and production activities. Also, once a lease has been obtained, the CZMA can still limit/prevent exploration, development, and production for that lease." Total amount of natural gas reserves affected: 362 TCF.

• U.S. Forest Service restrictions on natural gas recovery in national forests are significantly limiting the ability to access and produce natural gas. Forest Service restrictions "have restricted access to potentially rich natural gas areas" in national forests. Total natural gas reserves affected: 10 to 30 TCF.

• Federal courts have interpreted the Endangered Species Act in an extremely broad manner, prohibiting any kind of "adverse modification" to species habitat. "The designation of critical habitat can have significant cost and schedule impacts on gas development," notes the EIA report. For restrictions connected with a single area of piping plover habitat, "the net present value cost of the designation over 30 years would be $261 million to $979 million to the local economy." Total natural gas reserves affected: Unable to estimate.

• Hydraulic fracturing is a recovery technique that pumps a water-sand mixture into natural gas reservoirs to create cracks in the sub-surface rock and force gas to the surface. Approximately 60 to 80 percent of recovery efforts during the next decade will require hydraulic fracturing. Environmental activist groups, however, oppose splitting sub-surface rock and seek federal restrictions on the technique. "Federal or increased state regulation could delay gas production or make it uneconomical, thereby reducing the amount available at reasonable prices." Total natural gas reserves affected: 293 TCF.

James M. Taylor (taylor@heartland.org) is managing editor of Environment & Climate News.

For more information ...

The Energy Information Administration's December 2004 report, Environmental Policy and Regulatory Constraints to Natural Gas Production, is available online at http://www.ead.anl.gov/pub/dsp_detail.cfm?PubID=1796.