You’ll rarely find a business in America—and especially one in the fossil-fuel industry—asking for more regulation. The default mode of industry groups like U.S. Chamber of Commerce and the American Petroleum Institute (API) is that government is always the problem, and that less regulation is always the solution.
That’s usually been the position of the shale gas industry in the U.S., as new hydrofracking technology has enabled companies to tap vast new natural gas deposits, transforming the energy picture in the U.S.—and eventually, around the world. Ask any natural gas executive, and they’d tell you that the only thing holding back the industry was the threat of government regulations that would raise the cost of drilling and production. Fracking, as the industry group API says on its website, is a “proven and well-regulated technology.”
Green and many locals living in shale gas territory disagree, however, giving birth to an anti-fracking movement that may have more momentum than anything else in environmentalism today. And that movement has had a serious slowing effect on shale gas, with states like New York and Vermont restricting fracking. Overseas the public opinion of fracking is even worse, with countries like France banning the practice altogether. The International Energy Agency (IEA) has said that the world could be entering a Golden Age of Gas, so plentiful are shale deposits in countries around the world, which means the gas is there. But environmental concerns—if unanswered—could end that age early.
That’s why good regulation—far from retarding the growth of the shale gas industry—might be the only thing that ensures it. Such is the conclusion of a new study released by the IEA this week which found that “golden rules” of regulation are needed to usher in the golden age of gas. Without it, mass opposition could limit fracking altogether.
The technology and the know-how already exist for unconventional gas to be produced in an environmentally acceptable way. But if the social and environmental impacts are not addressed properly, there is a very real possibility that public opposition to drilling for shale gas and other types of unconventional gas will halt the unconventional gas revolution in its tracks. The industry must win public confidence by demonstrating exemplary performance; governments must ensure that appropriate policies and regulatory regimes are in place.
The IEA estimates that strict environmental regulations on fracking would add just 7% to the cost of gas production. What would that mean? Extra spending on cement design, selection and application for well—vital because too many wells in the U.S. have leaked into groundwater tables—some extra drilling time to ensure that things are done right, as well as green fracking fluids and an end to gas flaring and venting. None of these are new or untested technologies. They just have to be applied.
As Michael Levi of the Council on Foreign Relations points out, the right regulations will be more cost effective for the gas industry over the long term than the haphazard approach that is too common today:
The IEA estimates, of course, are extremely crude. It wouldn’t be surprising to see compliance costs twice what they estimate – or half. Either way, the bottom line remains: smart regulation of shale gas looks like it would be relatively cheap. It’s the excessively hands off approach that could turn out to be a lot more costly.
It really shouldn’t be that complicated. Any industrial activity—and fracking is an industrial activity, especially when done intensively—needs proper regulation. The current rules aren’t enough, but better rules aren’t that difficult. The question is whether the industry—with its knee-jerk rejection of government action—will see that regulation is in its own interests, along with the rest of us.