Industry Crossroads

The American oil and natural gas industry finds itself once again at a dramatic political crossroads in 2012. Not entirely surprising in an election year for a historically targeted industry, it is nonetheless alarming to see the wide divergence from the reality of what American oil and gas production provides and offers for the nation’s future, and what its opponents would have it reduced to for the sake of politics.

Thanks to a complete transformation of the nation’s energy supply and potential, made possible by the homegrown entrepreneurship and ingenuity of independent producers, the United States is poised to make revolutionary strides with new jobs, more revenues for state and local governments and the invaluable national security that comes with it. This is the path leading to the bright horizon of revived rust belt towns and a largely self-reliant energy future.

The emergence of horizontal drilling and hydraulic fracturing, led by America’s independent producers, has unlocked vast riches of shale oil and natural gas. As a result, the United States’ oil imports are down from 60% in 2005 to 47% today. Many experts project that the United States will be the world’s top petroleum producer in under a decade.

The other road points to closed U.S. factories, high energy prices, and increased political dependence on the Middle East. Well-organized, well-funded environmentalist movements, intent on inventing a carbon-free future, seek to shut down all development of U.S. petroleum, liquids and natural gas. Their tactics? Paint the entire industry as homogenous and greedy — the industry is “Big Oil” stealing funding from the education of our children and the healthcare of the elderly. Paint the industry as destructive — the industry’s mysterious “fracking” contaminates water, kills animals, and causes earthquakes. These are unfounded, purposeful claims but are also serious threats as the federal government now has more than ten separated agencies seeking to regulate American oil and natural gas exploration and production.

Preventing an onslaught of prohibitive federal regulations has become a growing priority for the Independent Petroleum Association of America over the past few years, as well as a growing challenge. Fortunately, our efforts to date have been largely successful, but with much more work to be done, IPAA continues to fight for independent producers and ensure that the tremendous potential of America’s oil and natural gas reserves are realized and made available a to the American people.

With regulatory issues, such as the manufactured debate over hydraulic fracturing leading concerns over the federal government’s involvement and potential to slow or stop American oil and natural gas production, the crawling pace of federal permitting continues to hinder American oil and natural gas production on a nearly prohibitive level. The federal government’s slow process of re-opening the Gulf for exploration and production, more than a year after the Deepwater Horizon accident demonstrates that the administration can restrict American oil and natural gas production.

And to date, the Environmental Protection Agency (EPA) has had the most aggressive federal hand on America’s independent producers, threatening to over-regulate the industry on a number of fronts, with one in particular leading the way.

Hydraulic fracturing, the technology which, combined with horizontal drilling has enabled the amazing shale revolution in America, has become the environmentalist’s bull’s-eye to take down the industry — and they are using the EPA to make it happen. The EPA is still conducting a closed door study to determine the effects of hydraulic fracturing on groundwater. Though IPAA has welcomed thorough investigation into the process, knowing our industry’s long history of safety, the EPA has recently, in the case of some early data from Pavillion, Wyoming, seemed aggressive to find fault that hydraulic fracturing contamination. It is an alarming posture, especially in light of EPA chief Lisa Jackson’s acknowledgment that there has not been one proven case of hydraulic fracturing contaminating drinking water.

EPA is also vigorously being called to regulate hydraulic fracturing under the Safe Drinking Water Act (SDWA). This disregards that the states are already safely and successfully regulating hydraulic fracturing. The immediate problem of imposing this specific federal regulation is that hydraulic fracturing is outside of the scope of the SDWA.

The SDWA was never intended to apply to well-completion fluids when it was passed in 1974. In the 1990s, environmental groups brought their case to court to change the scope of the legislation to regulate the industry. The 2005 amendment, coined by environmentalists as the “Halliburton loophole” is not a loophole at all, but a clarification of the legislation, which brought the scope back to the legislation’s purpose.