Strong Regulation Key to Shale Development


Author: Andre Peterhans

The unprecedented and rapid growth of natural gas from shale development in the United States has focused public attention on the energy industry. Previously unreachable natural gas resources can now be produced economically and responsibly, transforming our energy picture and launching a domestic energy renaissance with widespread positive economic and energy security implications. Nevertheless, concern over development, including hydraulic fracturing, water use requirements, and the potential impact of certain chemical additives, has led some to question the sufficiency of the current regulatory requirements and enforcement mechanisms in place to protect people and the environment.

While it may come as a surprise to some, Chevron is – as are many of the companies in the energy industry – in favor of a high standard of regulation, promoting the adoption of recommended practices when it comes to shale development, hydraulic fracturing, and their oversight. Surprised? You shouldn’t be. Strong and efficient regulation is an objective we share. We recognize that our ability to access and develop these abundant local resources depends on public confidence in the industry, its operations, and the regulators who oversee our activities.

Given the potential economic and environmental consequences of natural gas production, many parties favor stringent regulation.

Local communities that are potentially affected by shale development are concerned about how drilling and hydraulic fracturing activities could impact their environment, their homes, their farms, and their livelihoods. Not surprisingly, the public debate has often been shaped by inaccurate information and an oversimplification of technical issues. We also see an inordinate focus on hydraulic fracturing, which is a well-understood process with an excellent track record of several decades. Many blanket assertions have been made that stronger, more expansive regulations are needed. Chevron supports a sound regulatory structure and enforcement governing oil and gas operations. Nevertheless, calls for additional, and potentially duplicative, layers of oversight don’t properly recognize the effectiveness of the current regulatory framework or describe how suggested changes would improve operational performance.

Current Regulatory Framework

Let’s consider the regulatory environment that applies to gas from shale development today. It’s a combination of shared state and U.S. federal regulations, which are complemented by industry-recommended practices and guidance. State agencies have the primary role in many regulation and enforcement activities, leveraging their experience and local knowledge necessary for effective implementation. This is important because state agencies have a long history of regulating oil and gas development.  They also have extensive experience and expertise in the issues of importance to their states and regions, such as land use, geology, surface waters, and topography, which must be considered in determining safe ways to design and operate a well. Effective state inspection and enforcement – governance at the regional level instead of “one size fits all” federal regulations – are vital to public acceptance of increased natural gas from shale development. In practical terms, the states have the people, the knowledge, and the regulatory infrastructure to do the job.

The process is working, with states stepping up to the challenge. This year, Pennsylvania enacted a comprehensive Marcellus Shale legislative package that included significant updates to the state regulatory structure for shale gas development. The package increased setback requirements for separation between drilling operations and buildings, streams, and other water sources, promulgated new notice requirements in order to obtain drilling permits, increased amounts for penalties and security bonds, and provided additional authority for the regulatory agency. Previously, Pennsylvania had issued regulations that raised standards for well construction and increased corporate requirements to investigate and report on incidents of stray gas migration. West Virginia, Ohio, and other states have similarly enacted new rules regulating natural gas from shale operations.

Pennsylvania enacted laws further regulating the production of Marcellus Shale gas.

Furthermore, collaborative organizations such as the State Review of Oil and Natural Gas Environmental Regulations (STRONGER) and the Ground Water Protection Council  are helping to identify and share these practices across regulatory jurisdictions and promote improvements in state programs. Specifically, STRONGER performs audits on a state’s regulations and makes recommendations for enhancements. While state regulation plays an important role, that’s not to say there isn’t a role for federal regulation. In fact, the federal government already plays an important role in the regulatory framework for oil and gas. The Environmental Protection Agency (EPA) establishes overall goals and regulations for air, water, and waste. Major environmental statutes, including the Clean Air Act, the Clean Water Act, and the Safe Drinking Water Act provide clear authority for the EPA to establish programs and implement regulations. The EPA administers certain programs in certain states directly but delegates implementing authority to many state governments while retaining oversight and enforcement authority. This blend of authority has worked well to balance EPA program management and oversight with state regulatory capacity and authority.

Industry has played a central role as well, by proactively developing recommended practices for safe and responsible development of natural gas from shale. For example, a consortium of 11 of the Appalachian Basin’s largest natural gas and oil producers, the Appalachian Shale Recommended Practices Group (ASRPG), recently created and released a document outlining recommended standards and practices for all stages of regional shale development. The ASRPG’s Recommended Standards and Practices were developed to promote effective safety, environmental, and health practices. Other organizations, including the American Petroleum Institute and Marcellus Shale Coalition, have also released industry-recommended practices.

Going Forward

So we already have a comprehensive set of rules and practices in place. We have well-understood, safe, and proven technology that has evolved over decades, and we are committed to ongoing improvement. The opportunity – and challenge – exists to continually improve our regulations and practices to promote responsible development of this resource without creating inefficiency through bureaucracy.

Maintaining public confidence in our industry and the regulators overseeing development will help reap the benefits of the shale gale sweeping the U.S. This will require a commitment to responsible operations, ongoing partnership, and communication with the communities in which we live and operate. Strong regulations have a role, but simply adding more layers of oversight misses the goal of thoughtfully improving the robust set of regulatory processes we already have in place. So, far from being against regulation of oil and gas development, we welcome strong regulation and enforcement. In the long run, we all end up winning.

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Andre Peterhans is Manager, Strategic Planning for Chevron Corporation, leading a team responsible for monitoring activities and strategies of the company’s competitors and providing analyses and guidance on strategic issues to Chevron’s senior executives.  Mr. Peterhans holds advanced degrees in civil engineering and finance.