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Is the tide turning in favor of fracking?

Last week, I noted that a number of towns in Colorado have adopted resolutions and language supporting the oil and gas industry. Earlier this year, Texas and Oklahoma passed laws prohibiting municipalities from banning hydraulic fracturing. This past Tuesday, a federal judge in Wyoming put the brakes on the Obama administration’s rules for fracking on federal lands.

All of which raises an interesting question: Are fractivists beginning to lose the war? The Washington Times seems to think they might be.

“In a development that has caught both sides by surprise, the legal and political momentum these days appears to be running against the anti-fracking cause,” the paper reported. “In states where the revolutionary oil- and gas-drilling technique actually is being employed in a significant way, the movement is losing ground.”

I’m not sure the industry can declare victory just yet, but there’s no denying that events of the past few months have started to swing in fracking’s direction:
  • A report from the Environmental Protection Agency concluded the process has no widespread impact on water.
  • Denton had to repeal its fracking ban in the wake of a new Texas law that effectively rendered the municipal ordinance unenforceable.
  • Colorado Gov. John Hickenlooper detoured an activist-driven effort to put anti-drilling initiatives on the November ballot, and state courts have, for the most part, struck down bans.
  • Voters in Youngstown, Ohio, rejected a proposed fracking ban for the fourth time last November, defeating it by 15.7 percentage points – the largest losing margin yet.
  • Voters in Santa Barbara, Calif., killed a ban by 30 points, 63 percent to 37 percent, and Gov. Jerry Brown – hardly a poster child for conservative causes – has said that a ban “doesn’t make a lot of sense.”

Of course, environmentalists will counter that statewide bans are in place in Maryland, Vermont, and New York, and make the case that two California counties did, in fact, approve prohibitions last November.

But they won't tell you that New York’s decision was a product of truly bad science, and that the bans in Vermont and Maryland were of little significance because neither state produces energy from fracking. As for the California counties that passed bans, there’s no record of any drilling activity in either.

In other words, where anti-oil and gas initiatives have succeeded, they have been largely symbolic, relatively meaningless, and exercises in activist public relations rather than substantive policy-making.

As I said above, none of this should have the energy industry taking a victory lap. Activists are nothing if not resilient, and they have vowed to keep coming back in some communities where the bans keep failing. But I do know this:

If hydraulic fracturing were a danger to human health and environment, statehouses and courthouses – and even the White House – would be on a mission to choke it with regulations. Yet no legislation has passed. Courts are tossing the bans. And EPA says the process, done right, doesn’t taint water.

While that may not qualify as a triumph, it’s enough to give us hope that rhetoric is giving way to responsibility in the drilling debate.
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A tale of one city, one state, and fracking bans

This isn’t exactly a tale of two cities. It’s more a cautionary tale of one city and one state.

Last week, the Denton City Council decided to repeal an ordinance banning hydraulic fracturing in what may have been first time logic prevailed in a debate that has been devoid of common sense.

Local officials called it a strategic retreat that was in “the long-term best interests of the city.” That’s true. Denton was the target of lawsuits filed by the Texas Oil and Gas Association and the General Land Office, and taxpayers would have picked up the tab for a long, expensive legal battle.

Then there was the economic impact of prohibiting fracking in Denton, a move that could have cost the city $251.4 million in economic activity and 2,000 jobs; reduced tax revenues by $5.1 million; and slashed funding to the Denton Independent School District by $4.6 million.

So at least in one regard, the municipal leadership got it right: Maintaining the ban would have unnecessarily cost Denton and its citizens a whole lot of money, and that’s hardly in its “long-term best interests.”

I say “unnecessarily” for a reason.

There was never any doubt the ban was illegal. Texas law is clear about who oversees oil and gas operations in the state, and it’s the Railroad Commission. If Denton had a problem with that, the legislature – not an ill-conceived, insupportable, politically motivated ballot measure to ban fracking – was the appropriate place to deal with it.

The city had to know that. The voters who approved the ban had to know it. And I’m reasonably sure the activists behind the initiative had to know it as well. But no one seemed to care. Fear and emotion, not science and technology, ruled the day, just as they’ve ruled the day in almost about every discussion of fracking all over the country.

With one notable exception: Colorado.

As more and more local bans, or efforts to enact local bans, surface across the country, Colorado communities are taking a stand in favor of oil and gas companies. As the Denver Business Journal reports:
  • The Board of Trustees of Plattville, in Weld County, voted 5-0 for a resolution that states the town has no plans to approve a ban or moratorium on oil and gas operations.
  • Douglas County approved a resolution backing “continued energy development that is responsible, and the state of Colorado’s existing regulations and oversight for that development.”
  • Jefferson County endorsed a resolution supporting the energy industry and opposing “any permanent ban of any particular industry.”

These communities recognized something that apparently escaped Denton: Drilling, done responsibly, is safe, and the energy industry is central to the economic well-being of communities where drilling takes place place as well as those where oil and gas employees work and pay taxes.

In a sense, Colorado has acknowledged the same as well, thanks in no small part to Gov. John Hickenlooper’s successful efforts to keep anti-drilling initiatives off the statewide ballot last November.

The Denton ban was a function of environmental politics, pure and simple. It was bad, misguided, illegal policy. Had the anti-drilling activists there taken a moment to think it through – as localities in Colorado are doing – there would have been no need for the city to make a strategic retreat. Because they wouldn’t have had to back away from anything.
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A middle ground on U.S. oil exports with global security implications

Last week, U.S. Sen. Lisa Murkowski offered a novel idea that would foster exports of U.S. crude without an official lifting of the ban on foreign oil sales. It’s simple and reasonable, and would serve as an acceptable middle ground until Congress summons the nerve to end the prohibition altogether.

What she proposed was that foreign countries ask the United States to be exempted from the 40-year-old ban. The administration would then use its executive powers to grant the requests, which would be considered on a case-by-case basis.

There’s precedent for that.

In 1985, President Ronald Reagan lifted the ban on exports to Canada, declaring the move was in the national interest. Today, supporters of allowing sales to Mexico are using much the same argument, and Pemex has asked the Commerce Department to allow it to swap up to 100,000 barrels of heavy crude per day for roughly the same amount of lighter U.S. oil.

Given what’s going on in the world, the national interest argument may take on a more significant meaning.

Consider Poland, for example. It produces about 20,000 barrels of oil per day, and imports another 500,000. Almost all – 96 percent – comes from Russia, and Russia has shown no hesitation to use energy as a political tool and, if you believe some of those sales are bankrolling the conflict in Ukraine, a military tool as well.

So if Poland asked for an exemption to the ban, and the United States agreed, we would be helping to loosen Moscow’s grip on one of our European allies and perhaps much of the region itself.

Then there’s Iran. Tehran has said that it could put 1 million barrels of oil back in the market if the Obama administration succeeds in having economic sanctions lifted. (That’s probably a boast; 400,000 is more likely, at least in the near term.) Those sales would bring more money to a country that, according to the Wall Street Journal, is supporting the Taliban with “cash and arms”:

“Afghan and Western officials say Tehran has quietly increased its supply of weapons, ammunition and funding to the Taliban, and is now recruiting and training their fighters, posing a new threat to Afghanistan’s fragile security.” Iran’s strategy, the paper continues, is to counter American influence in the region.

In other words, by not giving some of Iran’s potential customers an alternative source of supply – and keep in mind, 20 percent of the European Union’s oil imports came from Iran before sanctions were imposed – we’re sitting by idly while our allies become dependent on a regime that is a sponsor of terrorism against the West.

The export ban has never made any sense in light of the U.S. energy revolution. But that lack of logic now translates into real global risk – risk that could be mitigated if we reduced the market for energy from countries whose interests run counter to our own.

That’s exactly what Murkowski’s proposal would help accomplish. Is it an ideal long-term fix? No. Washington still needs to separate reality from rhetoric and end the ban. But in the meantime, this may be a classic case of a half loaf being better than no loaf at all.

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EPA delivers a huge blow to fracking's critics

It was hardly a stop-the-presses moment, but last week the Environmental Protection Agency confirmed something a lot of us have known all along:

Hydraulic fracturing is safe.

In a long-awaited study that Congress requested in 2010, the agency undertook – by its own account – “the most complete compilation of scientific data to date, including over 950 sources of information, published papers, numerous technical reports, information from stakeholders and peer-reviewed EPA scientific reports.”

It concluded that hydraulic fracturing activities are “carried out in a way that have not led to widespread, systematic impact on drinking water resources,” said Thomas Burke, deputy assistant administrator of the EPA’s office of research and development.

“In fact,” he added, “the number of documented impacts to drinking water is relatively low when compared to the number of fractured wells.”

The report did concede that there were potential vulnerabilities, including wastewater disposal and well construction. But, once again, this is nothing new, and the industry has made a lot of progress dealing with those issues.

Environmentalists, of course, criticized the report and its methodologies while pointing to those vulnerabilities. That’s a standard strategy – try to change the debate when you’re losing the argument. But the fact is, by just about any measure, EPA handed drilling critics a pretty substantial defeat.

I’m a little hesitant to predict where all of this takes the dialogue over fracking, particularly given this administration’s habit of talking out of both sides of its mouth on energy issues. But I do think there are a few takeaways.

To begin with, we probably won’t see a really concerted effort in Washington to regulate fracking on non-federal lands. It’s tough, and illogical, to put forth punitive rules for a process that your own environmental agency says is safe.

If that’s the case, regulation will be left where it should be: with the states.

“EPA’s identified that the risks are local and can be managed,” former EPA administrator Bob Perciasepe told USA TODAY. “It’s up to states and industry to keep their eye on the ball. I think they’re clearly saying that these are things that states are building into their programs.”

He’s right.

And if that’s the case, maybe towns and municipalities will accept the fact that states – not local governments – have the technical expertise to oversee drilling, and the costly and ill-advised push for fracking bans will subside.

I don’t think states like New York will reverse course and allow fracking in the wake of EPA’s findings. Nor do I believe that localities that are so far down the road, Denton in particular, will suddenly realize their concerns are manageable and their fears overstated. Activists aren’t going to quit stirring the pot just because their biggest argument has collapsed.

But at least going forward, we now have a rock-solid foundation upon which to build any future conversation about the safety of fracking. That may be the best news of all.
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It's time for Congress to act on the other export debate

Over the past few weeks, a lot has been said and written about lifting the archaic U.S. ban on crude oil exports. But there’s another energy issue that is just as critical and should not get lost in the shadows of that debate:

The need to increase natural gas exports.

Unlike sales of crude overseas, which are currently banned under a law that dates back about 40 years, the United States does allow exports of natural gas. But companies seeking approval of export terminals have to go through both the Department of Energy and the Federal Energy Regulatory Commission in a process that is so long, complicated, and expensive it has the practical effect of limiting exports.

For example, Cheniere applied to the Department of Energy for approval of its Sabine Pass terminal on Sept. 7, 2010. It got the go-ahead from FERC on April 16, 2012, and from DOE 113 days later.

More recently, Dominion Resources submitted its request to permit a facility in Cove Point, Md., on Oct. 23, 2011. It didn’t clear FERC until Sept. 30, 2014, and was only just approved by DOE about three weeks ago. In the process, Dominion had to get more than 60 permits and approvals and agree to 79 conditions laid out by the commission.

Those aren’t the exceptions, either. They’re the rule.

The handful of terminals that have won FERC approval initially applied to DOE three to five years before being authorized, according to America’s Natural Gas Alliance. Over half of the permits that are still awaiting approval were sent to federal regulators in 2012 or earlier.

That’s ridiculous. But of course, it hasn't stopped critics from raising equally ridiculous arguments designed to cripple the prospects for LNG exports.

They say that we run the risk of running out of natural gas if exports are allowed. But what they conveniently ignore is that right now the amount of recoverable gas in the United States is over 100 times more than the amount consumed last year. Not only that, but the Energy Information Administration has projected that U.S. natural gas production will increase 48 percent between 2010 and 2035.

We’re not running out of gas. We’re awash in it.

Critics also argue that exporting LNG will push domestic natural gas prices up significantly. But a study from Deloitte found it would raise prices only minimally, 1.6 percent over 20 years. And while EIA has forecast slight increases to end users, many experts believe that higher prices could serve as an incentive for more exploration and production, boosting supplies, and offsetting some of increases.

Those bogus criticisms aside, here’s why we need to simplify the permitting process now:

Global LNG demand is growing. Since 2000, it has risen 7.6 percent per year, and Ernst &Young forecasts it will reach 500 million metric tons by 2030. A lot of other countries – including Russia, Oman, and Qatar – are looking to get a foothold in the market. If we don’t do something now to encourage exports, we run the real risk of not only missing the economic and trade benefits of that market, but also turning it over to countries that don’t share our strategic interests.

Congress is currently considering measures to expedite the process for applications. Measures in the House and Senate are aimed at shrinking the time between DOE and FERC approval, to 30 and 45 days, respectively. Both have strong bipartisan support, and Energy Secretary Ernest Moniz has indicated that his department will be able to comply with the proposed time frames.

It’s time to act. Washington needs to craft a single bill, pass it into law, and help ensure that the United States strengthens its global standing as a true energy superpower.

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