On Thursday, the Department of Energy released the first of two reports from the panel established by the Secretary of Energy Advisory Board (SEAB) to make recommendations regarding safe and environmentally responsible shale gas development.
The report rightly acknowledges the importance of shale gas development and steps taken by industry to protect groundwater. We share the report’s views about the employment, economic, and energy security benefits shale gas development is providing for the nation. And we agree with the core conclusion that development can occur in a safe and environmentally responsible manner.
We were also pleased to see the report emphasize the importance of state regulatory capacity by recommending increased support for the Groundwater Protection Council and the nonprofit, multistakeholder organization STRONGER (State Review of Oil & Natural Gas Environmental Regulations).
Some of the report’s other conclusions and recommendations, however, lead me to think the panel would have benefited from additional time to study the issues rather than being held to an arbitrary 90-day deadline.
Lack of industry representation
The short 90-day time frame meant the panel did not have a fair chance to examine carefully the concerns or challenge some of the assumptions about hydraulic fracturing that derive from emotional appeals rather than operational realities. Basically, the panel appeared to accept the notion that a major problem exists, and likely felt compelled to make recommendations to address it. The fact that the panel did not contain one industry representative unfortunately shows through in its recommendations.
The absence of industry representation meant an absence of knowledge about operational practices – and as a result, the report has a couple disappointing features.
First, it lacks an acknowledgement of ongoing industry and regulatory efforts, particularly state regulatory activities, to ensure responsible operations. The report reads as though state regulatory systems – which have traditionally overseen oil and gas production – have not adjusted at all to the new development occurring in their jurisdictions. That just isn’t the case. In our experience, state regulators are adapting quickly and effectively to the increased industry activity, based on their insight into local geologies and environmental considerations.
Second, the report does not make any attempt to weigh the costs and benefits of its recommendations – perhaps because the panel did not feel either qualified or mandated to do so.
Structures to discuss and disseminate best practices already exist
The report’s headline recommendation is a new industry super-structure to determine and disseminate “best practices.” We believe this is ill-considered on several levels. Let me explain why.
The central question confronting shale gas development concerns the best means of continuing to ensure safe and responsible operations and providing public assurance that sound practices are being universally deployed. In our view, the foundation of responsible development is a responsible assessment of the risks, regulations that address them, and competent regulatory enforcement capability.
As with any industrial activity, shale gas development does entail some risks. Our industry, however, has wide experience with risk management – individually, through association activities, and in partnership with proper regulatory authorities. The American Petroleum Institute (API) has developed a series of shale development guidance documents that encompass well integrity and production operations. Historically, API standards have been integrated into state regulatory frameworks. API is an American National Standards Institute accredited standards developing organization, operating with approved standards development procedures and undergoing regular audits of its processes. In addition, the API standards program has gone global, through active involvement with the International Organization for Standardization and other international bodies.
Additionally, many industry, professional and academic forums exist for the sharing of new technological developments, information and ideas. The Society of Petroleum Engineers and the API are just two prominent examples of organizations that have played a strong historical role in this regard. The SEAB panel’s report details no systematic deficiencies in current organizations or state regulatory systems, but nonetheless recommends a new “best practice” organization to augment them. While the proposal lacks operational specificity, we do know it would be industry-led but multistakeholder, national but regional, and nonregulatory but involve compliance assessments.
The SEAB panel must ask itself some hard questions concerning its initial recommendation for a new industry “best practice” structure. Would an industry entity be trusted by the public? Would local communities find such a national group relevant? Would it undermine state regulatory systems and authority? How would it include the thousands of companies that exist in the shale gas industry (versus the relatively few that operate in the nuclear or deepwater industries, which the panel is apparently using as models)? Would it divert attention and resources away from the fundamental need to assure the universal application of sound operational practices, such as state regulatory standards and enforcement capacity?
Fixing the shortcomings
As the panel begins the second half of its tenure, the Administration should appoint additional members with longstanding experience in the industry the panel is charged to address. In virtually all other endeavors, relevant experience is deemed obviously vital, not a “conflict of interest.” Without representation from the people who are operating in this industry, I’m concerned the final report will, by definition, be incomplete.
