Legislative Preview: 2014 Energy Bills

January 24, 2014 by michael · Comments Off
Filed under: Archive, Hydraulic Fracturing, Legislation, renewable energy 

Current through January 24, 2014

Reform defeated: SB14-035 Renewable Energy Standard Repeal *postponed indefinitely*

Senate Bill 35, introduced by State Sen. Ted Harvey, would have repealed “substantially all of the provision enacted by Senate Bill 13-252″ by returning the renewable portfolio standard to 10 percent from 20 percent for rural cooperative electric associations, among other cuts.

The bill, sent to the State, Veterans and Military Affairs committee was killed Wednesday on a 3-2 party line vote. The SVMA committee has been dubbed the “kill committee” by the minority party, where bills are sent to receive a quick despatch.

Comment: As this bill has been killed, the Independence Institute will examine a similar bill, proposed by State Sen. Ray Scott on Wednesday that would reduce the RPS requirement from 20 percent to 15 percent.

SB14-011 Colorado Energy Research Authority

Among other provisions housekeeping provisions, SB 11 “substitutes ‘clean energy’ for ‘renewable energy’” and authorizes additional monies in the amount of $2 million to create an “energy research cash fund” (ERCF) for the next five fiscal years.

Comment: Substituting “clean” for “renewable” energy is noteworthy. The fiscal note estimates a cost of $2,000,000 annually for the next five years for the ERCF from the state General Fund.

SB14-028 Expand Electric Vehicle Charging Station Grants *Passed Senate second reading with amendments*

SB 14 “expands the existing list of persons and entities that are eligible to receive moneys from the electric vehicle grant fund, administered by the Colorado energy office (CEO), by adding private businesses and nonprofits and allowing the CEO to consider the extent to which grant applicants’ proposed charging locations serve existing vehicles or encourages the acquisition of new vehicles.”

Comment: The bill’s fiscal note estimates that the impact will be “minimal” with grant monies collected under HB13-1110 providing the resource stream. Funding will go to as many stations as possible, but could include fulling funding those installations “in a location that is especially advantageous for support of the electric vehicle market.”

SB14-082 Renewable Energy Standard Adjustment for Cooperative Electric Associations

SB82: “In the section of the renewable energy standard statute setting aside a specific portion of electric generating capacity that cooperative electric associations must meet through distributed generation, the bill:
• Eliminates the disparity between cooperative electric associations serving fewer than 10,000 meters and those serving 10,000 or more meters;
• Establishes a uniform 0.5% of total retail electricity sales as the target percentage for distributed generation; and
• Allows the 0.5% to be measured collectively among these associations as a group rather than individually.”

Comment: Fiscal note estimates minimal impact.

SB14-103 Phase In High-Efficiency Water Fixture Options

SB103 “prohibits the sale of lavatory faucets, shower heads, flushing urinals, tank-type toilets, and tank-type water closets on and after September 1, 2016, unless they are a watersense-listed plumbing
fixture.”

Comment: No fiscal note. The bill defines a “watersense-listed plumbing fixture” as:

• Tested by an accredited third-party certifying body or laboratory in accordance with the federal environmental protection agency’s WaterSense program;
• Certified by such body or laboratory as meeting the performance and efficiency requirements of the program; and
• Authorized by the program to use its label.

The bill would expand the current requirements for “water-efficient indoor plumbing fixtures” which apply currently to builders of new homes, new state buildings, and new and renovated residential, office, and commercial buildings, but at a much lower and “less stringent” standard than the one defined by WaterSense.


HB14-1012 Advanced Industry Investment Income Tax Credit

HB1012 “repeals the Colorado innovation investment tax credit and replaces it with the advanced industry investment tax credit.” The tax credit would be available through the end of 2017 for “an equity investment in a qualified small business from the advanced industries, which consists of advanced manufacturing, aerospace, bioscience, electronics, energy and natural resources, information technology, and infrastructure engineering.” The tax credit would equal 25 percent of the investment and up to 30 percent if the business “is located in a rural area or economically distressed area.” Maximum tax credit would be $50,000 for a single tax credit, and up to $2 million per calendar year, with rollover.

Comment: No fiscal note at the present time.

HB14-1030 Hydroelectric Generation Incentive

HB1030 would “promote the construction and operation of hydroelectric facilities in Colorado” by providing incentives for additional installation and elevating community hydroelectric energy facilities “into the community solar garden statute.”

Comment: The bill’s fiscal note estimates a cost of less than $2,500 per year. The hydroelectric power in question would be targeted at those “small hydropower projects of 30 megawatts or less” sited in “streams, diversion ditches for irrigation, or existing dams.”

HB14-1064 Severance Tax Distribution To A Local Government That Limits Oil And Gas Extraction *postponed indefinitely*

HB1064 “prohibits any local government that has a moratorium or permanent prohibition on the extraction of oil and gas from receiving more direct distributions or grants and loans than the local government received in the fiscal year during which the moratorium or permanent prohibition was enacted.”

Comment: The restriction would be lifted in the following fiscal year if a county or municipality rescinds the moratorium or permanent prohibition. In the meantime, the “moneys that would otherwise have been distributed to the county or municipality are redistributed on a pro rata basis to all other eligible counties and municipalities.” The fiscal note puts a total price tag of approximately $40,000 over the next two fiscal years.

In other words, the bill would properly restore balance between counties and municipalities who choose to limit oil and gas extraction and those that do not, as the localities instituting prohibitions should not benefit from increased activities elsewhere by matching severance tax revenues to activities permitted.

**Bill postponed indefinitely, 7-6 party line vote:

Jonathan Singer, D-Longmont, said. “My community is downstream and downwind from oil and gas operations and we feel the public health impacts of fracking regardless of existing fracking bans.”

Sonnenberg presented his proposal as a measure of fairness, ensuring that cities don’t benefit financially from a practice they’ve banned and that those communities that do allow fracking benefit from more of the severance tax revenue.

“Passing this bill would have directed a higher percentage of severance tax funds to communities that help provide for the energy needs of our state,” said Sonnenberg.

“I am disappointed the Democrats failed to see the importance of providing these communities additional revenue to support the oil and gas industry.”

HB14-1067 Renewable Energy Electric Standard REAs Move to 2025

This renewable reform bill, HB1067, “changes the target date to achieve the renewable component of the energy generation portfolio of retail cooperative electric associations [CEA] serving 100,000 or more customers, and qualifying wholesale utilities” from 2020 to 2025.

Comment: The fiscal note indicates a minimal impact. CEAs required to comply with the 20 percent renewable energy standard by 2020 would need to meet step-change adjustments that increase from 6 percent in 2015-2019 to 20 percent in 2020 would see a five year extension for meeting requirements. Measures available to comply with the requirement include development of “eligible generation facilities,” entering into power purchase agreements with “an eligible energy generation facility,” or purchasing “existing renewable energy credits”–each of which, the fiscal note determined, would  involve “additional costs” for the CEA.

The Independence Institute will also examine any additional energy bills introduced this session as they become available. This bill survey, completed on January 10, did not indicate any bills on hydraulic fracturing.

HB14-1113 Electric Renewable Energy Standard Reduction

HB1113 orders the public utilities commission to establish electric resource standards, or minimum percentages of electricity that electric service providers “must generate or cause to be generated from recycled energy and renewable energy resources.” This bill moves the current required minimums from 20 to 15 percent until 2019, and from 30 to 15 percent for 2020 and subsequent years. It also reduces the required minimum for rural electric coops to be reduced from 20 to 15 percent for 2020 and in the years following.

Comment: No fiscal note. This bill looks to challenge provisions from last year’s SB252, while also leveling all required electricity standards to be a flat 15 percent for both investor-owned and rural electric cooperative associations from 2020 and thereafter. Step-increases mandated by earlier bills are voided and returned to a standard 15 percent.

HB14-1138 Renewable Energy Standard Add Hydroelectric to Eligible

HB1138 “amends the definition of ‘renewable energy resources’ that can be used to  meet the state’s renewable energy standard to include hydroelectricity and pumped hydroelectricity.”

Comment: Fiscal note indicates minimal impact. The impact on state policy, however, could be quite large. Adding hydroelectric and pumped hydroelectric electricity to be added to the state’s list of eligible energy resources for meeting Colorado’s renewable energy standard “reduces the amount of energy required to be generated from other eligible resources (principally wind),” according to the bill’s fiscal note. This could affect not only state agency and local government electricity rates, but those of ratepayers statewide as well.

HB14-1150 State and Local Government and Federal Land Coordination

HB1150: “The bill creates the division of federal land coordination in the department of local affairs to address federal land decisions in Colorado that affect the state and local governments. The chief coordinator is the head of the division and is required to form a federal land coordination task force to study certain federal land decisions. The department of agriculture, the department of natural resources, the Colorado tourism office, the Colorado energy office, and the office of economic development are required to assist the division at the request of the chief coordinator. Based on task force findings, the chief coordinator may recommend that a local government receive a grant for research and analysis to form a coordinated response to a federal land decision.”

Comment: No fiscal note.

HB14-1159 Biogas System Components Sales and Use Tax Exemption

HB1159: “The bill exempts from state sales and use tax components used in biogas production systems. Local governments that currently impose sales or use tax on such components may either continue to do so or may exempt them from their sales or use taxes.”

Comment: The fiscal notes estimates a reduction in state tax revenues of up to $635,000.

This bill creates a sales and use tax exemption, or carve out, for capturing biogas to be used as a renewable natural gas, or for equipment used to create electricity from the biogas. Biogas “is
a natural by-product that is released as manure, food waste, and other organic compounds
breakdown.” This bill appears targeted to one project in Weld County, the Heartland Biogas Project, a 20 MW “anaerobic digester and renewable natural gas (RNG) facility” set to come online as soon as April 2014.

January 23 Energy Roundup: Fracking Dishonesty; Interior Sec. Jewell Boots Press

January 23, 2014 by michael · Comments Off
Filed under: Archive, Hydraulic Fracturing, renewable energy 

Periodically, the Independence Institute’s Energy Policy Center will take a look at the good, the bad, and the ugly in energy stories from around the United States and abroad, and bring the best (and worst) of those stories to your attention.

1. Secretary of the Interior Sally Jewell may have violated Colorado Open Meetings Law under its sunshine statutes by shutting out members of the press while visiting Moffat County on Tuesday. The meeting in Colorado centered on the status of the sage-grouse, a species whose designation could affect energy projects in the northwest portion of the state:

As she was leaving, Leavitt Riley said she saw Jewell in a car in the parking lot and the driver-side door was open, so she approached Jewell “and she said the press was not allowed at this meeting,” Leavitt Riley recalled.

“I said, do you realize more than a dozen elected officials were in it? She said the tour was open to the press but this was a closed meeting” and then drove away, Leavitt Riley said.

She said the newspaper is pursuing the matter with the Colorado Press Association. No one with the U.S. Secretary of the Interior’s office was available for comment Tuesday night.

2. From Lachlan Markay at the Washington Free Beacona Politico column riddled with inaccuracies from anti-fracking activists:

A pair of prominent environmentalists penned a column Tuesday for Politico Magazine attacking hydraulic fracturing littered with dishonest and incorrect claims.

“If you calculate the greenhouse gas pollution emitted at every stage of the production process—drilling, piping, compression—it’s essentially just coal by another name,” McKibben and Tidwell wrote.

The claim is frequently sourced to Cornell scientists Robert Howarth and Anthony Ingraffea, who have found significantly higher life cycle emissions than are found in other studies.

Numerous government agencies, environmentalist groups, and academics have panned Howarth and Ingraffea’s work on the issue and produced their own studies showing relatively low life cycle emissions from natural gas.

“Their analysis is seriously flawed,” according to three Cornell colleagues, professors in the university’s departments of earth and atmospheric sciences and chemical and biological engineering.

3. Michael Bastasch at The Daily Caller highlights a report on the social benefits of fossil fuels:

Burning off carbon dioxide into the atmosphere to provide cheap electricity may have affected the climate, but the benefits of a carbonized economy far outweigh the costs, according to a new study.

The pro-coal American Coalition for Clean Coal Electricity (ACCCE) released a study showing that the benefits of carbonized fuel, like coal, to society are 50 to 500 times greater than the costs. Over the past two-and-a-half centuries increased fossil fuel energy production has helped more than double global life expectancy and increase global incomes 11-fold.

4. North Carolina State University issued a study finding that increasing the use of electric vehicles “is not an effective way to produce large emissions reductions”:

“We wanted to see how important EDVs may be over the next 40 years in terms of their ability to reduce emissions,” says Dr. Joseph DeCarolis, an assistant professor of civil, construction and environmental engineering at NC State and senior author of a paper on the new model. “We found that increasing the use of EDVs is not an effective way to produce large emissions reductions.”

The researchers ran 108 different scenarios in a powerful energy systems model to determine the impact of EDV use on emissions between now and 2050. They found that, even if EDVs made up 42 percent of passenger vehicles in the U.S., there would be little or no reduction in the emission of key air pollutants.

Fracking Bans: A Postmortem

November 8, 2013 by michael · Comments Off
Filed under: Archive, Hydraulic Fracturing, Legal, Legislation 

A contentious battle between anti-fracking activists such as Our Broomfield and supporters of the energy gathering method, including the Colorado Oil and Gas Association, will have to wait just a bit longer for the dust to settle in Tuesday’s election.

Broomfield’s Question 300, a 5 year prohibition on the use of hydraulic fracturing and associated activities, will go to an automatic recount some time next week depends on the outcome of settling the remaining outstanding ballots. The measure was defeated by a mere 13 votes in the initial count:

Yet there is a wild card in the recount process — there are still eight days for military and overseas ballots to be returned, and deficiencies in some Broomfield ballots, such as questions about signatures or first-time mail voters who did not include a copy of their ID — need to be addressed. Those ballots could change the final tally and impact a recount, said Andrew Cole, a spokesman for the Secretary of State’s Office.

If such a small margin remains, the Colorado Secretary of State’s office told the Broomfield Enterprise an automatic recount would be triggered, using the “one half of one percent difference” rule.

The proposed fracking bans elsewhere across the state–Fort Collins, Lafayette, and Boulder–amounted to public relations window-dressing for anti-fracking activists in areas where hydraulic fracturing typically has not occurred in the past, or where the possibility of new developments would soon take place.

“Boulder and Lafayette were nothing more than symbolic votes. Lafayette’s last new well permit was in the early 1990’s and Boulder’s last oil and gas well was plugged in 1999,” Colorado Oil and Gas Association president Tisha Schuller told The Colorado Observer.

As for Fort Collins, The Coloradoan blasted the measure there in a pre-election editorial for making the city a “pawn” in a “potentially costly environmental position statement” that “smacks of agenda-based partisanship” in a city that has few natural resources and is already ninety percent off limits to oil and gas development, even before the 5 year moratorium goes into effect.

Following the passage of the three measures, the Denver Post expressed disappointment in what it dubbed an “irresponsible agenda” in the form of the anti-fracking opponents’ real desire for a complete ban on hydraulic fracturing, disguised as local grassroots referenda.

“Symbolism needn’t be coherent,” the Post said.

Neither was the reaction to support of hydraulic fracturing when Zev Paiss, part of Frack Free Boulder, equated families who depend on natural resource development to terrorists:

“The scientists and their families who work on weapons of mass destruction depend on that regular paycheck too.”

In addition, that irresponsible symbolism will likely trigger big dollar lawsuits from the state:

Gov. John Hickenlooper told CBS4 Political Specialist Shaun Boyd he will sue any community that bans fracking. He says the state constitution splits surface and mineral rights and bans violate that. State law also gives the Colorado Oil and Gas Commission rule-making authority, not local governments.

That didn’t seem to faze anti-fracking activists like Josh Fox, who tweeted:

That the symbolic fracking war pitted David–grassroots, underfunded fracking opponents–against the Goliath known as the oil and gas industry became part of the campaign narrative in all four measures, something the Wall Street Journal noted:

Colorado, with its long history of energy extraction, would be a bigger test of whether the oil and gas industry and its supporters can surmount growing opposition from some communities and national environmental groups.

As Colorado Peak Politics concluded, the successes emboldened not a rag-tag coalition, but a mightily funded effort to launch “frack wars across Colorado.”

Those big dollars, in a post collected by Peak, point to under-the-table, “dark” money being spent to support the bans. The decentralized attacks on fracking in Colorado can be traced, in part, to smoke-and-mirrors, DC-based outfits like Center for Western Priorities, according to the Washington Examiner.

With both sides claiming victory–and with Broomfield’s results hanging in the balance for a few more weeks and possible lawsuits looming on the horizon–2013’s fracking bans may only be a prelude to more municipal proposals, and possibly a statewide measure in 2014, according to the Denver Business Journal.

Much Ado About Thumping: Denver Post one-sided story

March 26, 2013 by Amy · Comments Off
Filed under: Hydraulic Fracturing 

By Simon Lomax

Be afraid. Be very afraid…

vibration

That was the Denver Post’s front page article on March 16, which profiled a couple – Mieko and Charles Crumbley – who claim seismic surveying near Brighton, Colo. damaged a groundwater well on their property and put cracks in some of the walls in their home. But the oil and gas company that commissioned the survey says its contractors did not cause the damage, according to the story by the Post’s environmental writer Bruce Finley. Sounds like one of those classic “he said, she said” situations, right?

Well, no, actually. In reality, the claims by the Crumbleys are very unlikely, based on readily available facts on the way seismic surveying works. But the reporter failed to include those facts, and painted a misleading and frightening picture for his readers.

The type of seismic surveying in question is carried out by vibroseis trucks, which are informally known as “thumper trucks.” The use of these trucks has greatly reduced the use of small dynamite charges in seismic surveying. Here’s how the reporter describes the way these vehicles work:

“[T]he trucks, weighing up to 30 tons, drop heavy, metal vibrator plates from their undercarriages to thump and shake the ground. Analysis of pressure waves, similar to ultrasound, generates data that companies use to determine where to drill for oil and gas.”

Sounds pretty ominous. But take a look at this video of some vibroseis trucks in action:

In fact, while these vehicles are unquestionably big, the vibrations they create are very small. For that reason, scientists with state and federal agencies, experts in academia, the geologists and engineers of the oil and gas industry, and even other media outlets have reaffirmed the safety of vibroseis trucks many times. Here are a few examples:

In an urban environment, vibroseis-generated waves are less than background noise generated by buses, trucks, and trains … At its source you can feel a vibroseis shake the ground but as you move away your ears will hear the airborne sound waves much longer than your feet can feel those in the ground.

Utah Geological Survey

Residents standing near a vibroseis truck … may be able to detect it, but this process will not cause any interruptions of daily life or damage to structures.

U.S. National Energy Technology Laboratory

Despite their relatively benign operations, these big machines sometimes appear more daunting to the populace than the commonplace dynamite. To assuage any concerns in that regard, companies sometimes resort to public demonstrations prior to operations. … Two light bulbs and two raw eggs were buried eight inches under the vibrating pads. Following the demo, the eggs were retrieved unbroken and the light bulbs still worked – to the amazement of the crowd of onlookers…

American Association of Petroleum Geologists

“If you stand near the truck you’ll be able to feel slight shaking in the bottom of your feet, but the level of shaking is far below the levels required to cause damage to pavement or structures” said [USGS scientist Rob] Williams.

U.S. Geological Survey

The seismic imaging process does not damage the street or negatively impact the earth below ground.

Long Beach Post (Long Beach, Calif.)

[T]here is no reliable evidence of these trucks causing well problems or damage to buildings.

University of New Brunswick, Canada

Unfortunately, the Post story didn’t just leave out these expert opinions. The article went a step further and suggested the Crumbley claim was one of several structural damage complaints. From the news story:

“State records show that since 2000, residents have filed 16 formal complaints about seismic surveys.”

Given the statements by the USGS, NETL and others about the very low risk of structural damage from vibroseis truck, we asked the Colorado Oil and Gas Conservation Commission to identify those 16 complaints, which include the Crumbley case. Then we reviewed the case files on the COGCC’s online database.

It turns out just three of the complaints allege any structural damage from vibroseis truck operations. The rest of the complaints mostly deal with disputes over property access, noise and the potential impact of these heavy vehicles on soil and crops. Besides the Crumbley case, there are no other complaints of damage to a house, and only two allegations of damage to water wells.

In the first water well complaint, from 2000, the COGCC concluded there was “no indication that oil and gas activities in this area impacted the well.” It turned out the well was located next to the burned-out shell of an old house, hadn’t been used in two years, and there was trash both around and floating inside the well.  In the second water well complaint, from 2002, the COGCC found“no direct evidence of impact due to oil and gas operation” and concluded “[t]he most probable cause is corrosion in the casing from a shallow aquifer.”

So, instead of state records showing 15 other cases that support the Crumbley complaint, there appear to be none. Which makes sense, of course, because state and federal officials, industry experts and academics have repeatedly said that vibroseis trucks are very unlikely to cause structural damage.

However, let’s play the reporter’s game for a moment and assume the worst possible interpretation of those state records. Even when you group together all the 16 complaints to the COGCC that mention seismic surveying over the last 13 years – and include some more from residents in Aurora, Colo., as the Post’s story did – it’s hardly evidence of a commercial activity run amok. In fact, the Post’s own reporting suggests an average of between one and two complaints a year. That’s not bad when you consider Colorado’s oil and gas production has more than doubled since 2000. And it’s not scary either.

Of course, only time and further investigation will tell whether the Crumbley’s claims – however unlikely – are correct or mistaken. We’ll also have to wait and see if the alarmist tone of this particular news report scares some other residents into blaming seismic surveying for cracks in their drywall. But we can say two things now without equivocation: The oil and gas industry will cooperate fully with the state regulators investigating this matter, and the business of seismic surveying is nowhere near as scary as reporter Bruce Finley would have you believe.

This column appeared originally on Energy In Depth, a project of the Independent Petroleum Association of America as a research, education and public outreach program “focused on getting the facts out about the promise and potential of responsibly developing America’s onshore energy resource base.”

For a well-researched, easy-to-read, factual primer on hydraulic fracturing, check out our paper Frack Attack: Cracking the Case Against Hydraulic Fracturing.

NY Governor scared of his eco-left flank

January 9, 2013 by Amy · Comments Off
Filed under: Archive, New Energy Economy 

For the last four years, the state of New York has imposed a moratorium on hydraulic fracturing supposedly to give Governor Andrew Cuomo time to study the process before making a decision on whether or not to lift it.

Four years seems like a long time to study a process that has been around for decades and used safely and successfully in multiple states during that time. Now we may have some evidence as to why it has taken that long.

Last week the New York Times reported Gov. Cuomo, a democrat, buried a state analysis concluding that hydraulic fracturing can be performed safely in the empire state. According to the Times, Cuomo “has long delayed making a decision, unnerved in part by strident opposition on his party’s left.”

Coming from a politically savvy family (his father Mario Cuomo was Governor from 1983-1994), Cuomo is no stranger to party squabbles, which makes this situation even worse.  A seasoned politico, Cuomo is so frighten by his eco-left flank that instead he chose to bury the facts, bury the science that came from his own state agency.

Based on the degenerating fracking dialogue in Colorado, Cuomo’s fears are justified.  He may have read how the eco-left has attacked Colorado democrat Governor John Hickenlooper, a former geologist, for his support of fracking. Or Cuomo could have watched this scary video of protesters getting in Hick’s face and surrounding his car.  Or maybe he saw the “Faces of Hate” in Boulder.

These tactics are meant to intimidate and squash free speech. They seem to work in New York.

Fun with Fracking…

September 21, 2012 by Amy · Comments Off
Filed under: Archive 

Energy Policy Center Director Amy Oliver Cooke has fun talking energy, especially when wearing a hot pink “Mothers In Love with Fracking” t-shirt. Thanks to Tom Barry of The Villager for this photograph and his article on the American For Prosperity (AFP) event that featured Dick Morris. AFP invited Amy to be the warm up act to discuss Obama’s energy policy.

Energy Policy Center Director Amy Oliver Cooke has fun talking energy, especially fracking!

Independence Institute Energy Policy Center Director Amy Oliver Cooke has fun talking energy, especially fracking!

Frack Attack: Cracking the Case Against Hydraulic Fracturing

July 26, 2012 by jlongo · Comments Off
Filed under: Archive 

IP-10-2012 (July 2012)
Author: Donovan D. Schafer

PDF of full Issue Paper
Scribd version of full Issue Paper

Introduction:
A ban on fracking would not satisfy those who present general arguments against any kind of development. Acceptance of these arguments would require an outright ban on all oil and gas activities, new wind farm construction, electric transmission construction, residential housing developments, road construction, and the like. Before accepting any argument against fracking as sufficient grounds to restrict or ban its use, one should take that argument to its logical conclusion and consider the full set of repercussions. For if such arguments are granted valid status, they will be used again and again by whichever parties can benefit from shutting down any particular form of development.

New EPA Regulations On Fracking

April 20, 2012 by schafer · Comments Off
Filed under: Archive, New Energy Economy 

This past Wednesday, the EPA released new regulations on hydraulic fracturing (“fracking”). Surprisingly, the 588 pages of regulations don’t amount to much. At best, they codify existing industry practices. At worst, they might cause delays and other unintended consequences.

The new regulations focus on “green completions” (“completions” refers to the whole well-stimulation process, including fracking). Immediately after a well is fracked, the mixture that flows back up to the surface includes water, sand, natural gas, and other hydrocarbons. Conventional equipment cannot handle the abrasive sand—because it erodes the metal components—so companies let the mixture flow into a plastic-lined pit until the sand concentration is low enough to use the conventional equipment. What the EPA and environmentalists don’t like about this process, is that while the well is flowing to the lined-pit, the gas is escaping into the air rather than going into a pipeline.

Green completions use special equipment that can filter out the sand before the mixture goes into the conventional equipment. This way, companies can separate out the natural gas and flow it into the pipeline from the very beginning.

Before these regulations, half of all completions were already using green completion technology, primarily as a way to capture and sell more of the gas. The percentage of green completions was also, undeniably, trending upward. So why the need for EPA regulations when companies were already making these changes on their own?

The concerns that gave rise to these new regulations were emissions of volatile organic compounds (VOCs), benzene, and methane in the initial, uncaptured flow of gas. These are natural hydrocarbons and components of natural gas, i.e. they are not chemicals additives from fracking fluids (sometimes benzene is added to fracking fluids, but most benzene emissions result from the natural gas itself).

VOCs are a concern because they are SMOG precursors. SMOG is a respiratory irritant, so it can increase incidences of asthma, and cause other problems, but only at high concentrations. SMOG was first identified in Los Angeles in the 1950s, because it was so bad that people could literally see a brownish haze set over the city. But how bad is SMOG today? From 1970 to 1990 the installation of catalytic converters in cars reduced smog-forming tailpipe emissions by 99%. Consequently, when people compare SMOG caused by oil and gas activity to that from cars—as was done recently in a an article in the Dallas Morning News—they fail to realize that cars are no longer a major source of SMOG forming emissions. So, while oil and gas development does result in SMOG levels comparable to that from urban traffic, that does not suggest dangerous levels of SMOG.

Likewise, the reductions in benzene would have a minimal effect on improving health, given the ultra-low concentrations of benzene emissions, and the short-lived nature of these emissions. (for details on benzene see Fracking: Chemicals, Cancer, and Relative Risks).

While the benefits from these new regulations are likely to be elusive—and I do not support needless regulations—I must admit that they do not look terribly destructive. As already noted, many companies have already begun to do green completions.

One concern is that there may not be enough equipment available for green completions, which could cause delays or a bidding war that would drive up the prices beyond cost-effectiveness. However, the regulations do not go into effect until 2015, which should hopefully give enough time to manufacture more equipment.

Another possible problem is related to pipeline construction. When companies develop a field, they move quickly from one well to the next, in order to make the most efficient use of their drilling and fracking equipment. Sometimes, as a result, they outrun their pipeline installation crews. The pipeline, however, must be in place to do a green completion. Otherwise, there’s nowhere to put the captured gas. What companies usually do, in this case, is complete (“frack”) the well, flowback into the plastic-lined pit (for various technical reasons, flowback needs to happen right away), and then shut the well in (close the valve) until the pipeline is installed. With these new regulations, companies will have to precisely schedule their pipeline, drilling, and fracking operations. But even with the most precise scheduling, there will inevitably be delays. The regulations will compound the cost of these delays by requiring rented equipment (costing tens of thousands of dollars per day) to sit idle while pipelines catch up.

This brings me to my final criticism, common to many regulations: The one-size-fits-all approach. If it makes economic sense for a company to do a green completion (as the EPA suggests), it will do so—but under unique circumstances, such as the occasional delay, or in cases of difficult terrain, remote areas, or unique safety considerations, companies will no longer have the freedom to make intelligent well-by-well assessments of whether or not green completions make sense in a particular circumstance.

With a nation still struggling to find its way out of a recession, and a manufacturing boom fueled by cheap natural gas, why waste our efforts on needless and potentially damaging regulations? Even if the damage turns out to be small, the number of man-hours already spent drafting, reviewing, commenting on, and reading the 588 pages of regulation were, no doubt, a waste of human resources.

Fracking: Chemicals, Cancer, and Relative Risks

March 27, 2012 by schafer · Comments Off
Filed under: Archive, New Energy Economy 

The Colorado School of Public Health (CSPH) at the University of Colorado recently announced an article that will be published this month in the journal Science of the Total Environment. The article is based on a study of air pollution resulting from oil and gas development (including hydraulic fracturing or “fracking”) in Garfield County. According to the announcement, the article will reveal findings of benzene and other “potentially toxic petroleum hydrocarbons” at concentrations potentially hazardous to human health. But before this study, or any similar study, can be taken as a basis for alarm, several questions need to be answered: What are these “potentially toxic” chemicals? Where do they come from? And how dangerous are they really?

To answer these questions, it will be helpful to focus on just one chemical: in this case, benzene—the chemical most often associated oil and gas development. Focusing on benzene will also be helpful in evaluating the CSPH study, because, according to the announcement, benzene was the “the major contributor to lifetime excess cancer risk” found in the study.

One reason benzene is so often associated with oil and gas development is that it’s a natural hydrocarbon—like methane, propane, octane, and the hundreds of other chemicals in the mixtures we call “crude oil” and “natural gas.” Consequently, benzene is also found in gasoline, diesel fuel, and engine exhaust, which further increases the presence of benzene near oil and gas development. Lastly, because benzene has desirable chemical properties, it is also separated from crude oil for use in industrial applications, including—among many other things—use as an additive in fracking fluids.

Given the uses above, it should not be surprising that benzene can be found everywhere, not just near oil and gas development. According to the toxicology profile provided by the US Department of Health and Human Services, “Benzene is ubiquitous in the atmosphere.” Not only does it come from tailpipes, but also cigarettes, volcanoes, forest fires, and even camp fires. Government agencies, however, are usually not alarmed by the benzene levels found in our daily lives, because they recognize that the mere presence of a toxin (the fact that a laboratory can physically detect it) does not automatically pose a threat to public health: It is equally important to determine what concentrations can actually do harm.

At what level, then, does benzene become a problem? The truth is, we don’t know. With limited data, the EPA does the best it can to estimate relative risks at various levels of exposure. In the case of benzene, the EPA uses a 25-year-old study (published in 1987), in which workers were exposed to concentrations of benzene measured in parts per million (ppm)—concentrations literally thousands of times higher than the levels the EPA ultimately tries to estimate. The EPA then performs a linear extrapolation (i.e. draws a best-fit line through the data) to estimate a concentration of benzene that will result in 10 additional cancer cases (not to be confused with cancer deaths) per million people exposed. This is essentially the same as determining a level at which the cancer risk for an individual increases by one-thousandth of a percent (0.001%). When considering studies like the CSPH study, it can be more useful to think of the increased cancer risks on the individual level because the exposures in such studies are localized and rarely affect more than a million people—typically they affect a few hundred or less.

For benzene, the EPA estimates that a 0.001% increase in cancer risk corresponds to exposures of 0.4 parts per billion (ppb) in the air and 10 ppb in drinking water. For even greater caution, the EPA set the actual limit on drinking water, enforceable under the Safe Drinking Water Act, at 5 ppb.

While a 0.001% risk may seem small to begin with, there is one critical assumption that needs to be remembered when using these EPA estimates: the calculated risks assume a person will continue to be exposed to the same level of a toxin or carcinogen for their entire lifetime. This is especially unlikely in the case chemicals like benzene, because it is a biodegradable substance—and, in the case of the CSPH study, it is produced by temporary activities.

Also worth considering is the fact that a wide range of uncertainty results from the process used to generate the EPA estimates. Within the range of uncertainty, the EPA selects the most conservative (i.e. the most protective) estimate to establish as the official estimate. Thus, as explained in the EPA calculations, there is an “equal scientific plausibility” that the real levels of benzene corresponding to a 0.001% increase in cancer risk could actually be more than 3-times higher than the current estimates (1.4 ppb in the air and 35 ppb in the water).

These are important considerations when evaluating studies like the CSPH study, since these studies often express their findings in relation these EPA estimates. Without a proper understanding of what these estimates represent, they can give an exaggerated perception of the relative risks involved. Consider, for example, the EPA report that found benzene contamination in Pavillion, Wyoming. In press releases, it was announced that benzene was found at levels 49 times higher than the EPA limit. This, no doubt, caused considerable alarm for the public—but few realized that this represented a 0.02% increase in cancer risk, again, assuming a lifetime of exposure at that level. However, just six months later, the benzene level had fallen 40%. Adjusting for this rate of biodegradation, the total increased cancer risk would have been only 0.0005%. And while this level represents a very low risk, it’s also worth mentioning that this level was found in a deep monitoring well, specifically used to detect contamination—in other words, not a single person was ever actually exposed to this level of benzene. Unfortunately, none of these considerations, are quite as attention-grabbing as the statement: “Benzene found at levels 49-times above Safe Drinking Water Limit!”

Just as it is important to understand what EPA limits represent, it is also important to consider how the increased risks from a particular activity relate to increased risks from air pollution in general. The CSPH study calculated an increased cancer risk of 10 cases per million people living near oil and gas development. But, when compared to the average increased cancer risk nationwide—due to factors such as automobile emissions and industrial activity—the numbers are not quite as alarming. According to the EPA’s most recent National-Scale Air Toxics Assessment, the average increased cancer risk nationwide due to air pollution is 50 cases per million. The risk in Denver is even higher (almost 80 per million) simply because it is an urban environment. Garfield County, on the other hand, has a risk of only 20 per million. Thus, a person living near oil and gas development in Garfield County will experience a cancer risk of roughly 30 per million, far below the national average, and less than half the risk that results from living in an urban environment.

Benzene and other air pollutants should not be ignored when discussing oil and gas development. But it is important for the public to realize that the limits set by the EPA reflect concentrations that present very small—though perhaps not insignificant—risks, and that these risks are comparable to the risks associated with automobile emissions, urban living, and industrial activities in general.

It should also be remembered that, for the purposes of this post, benzene was used as an example because it is one of the most dangerous and most common chemicals associated with oil and gas development; however, the same considerations and relative risks apply the many other chemicals associated with oil and gas development—including xylenes, trimethylbenzenes, aliphatic hydrocarbons, and other compounds that will likely to receive attention in the CSPH study.

The Truth About Fracking and Water Scarcity

March 21, 2012 by schafer · Comments Off
Filed under: Archive, New Energy Economy 

This post will be the first in series on hydraulic fracturing (”fracking”), in which Independence Institute research associate, Donovan Schafer, will take on specific issues related to fracking. In this post he focuses on the claim that fracking will deplete Colorado’s water resources. Enjoy!

Two recent articles—one in the Denver Post and another in the Huffington Post—present the issue of water depletion as it is commonly presented by those who oppose fracking. Wendell G. Bradley, in the Denver Post, urges lawmakers to “cut off fracking’s unconscionable amounts of water use,” while Gary Wockner, in the Huffington Post, warns that fracking would use up the “last drop in the bucket of Colorado’s rivers.”

These views simply do not reflect reality. In January, the Colorado Division of Water Resources, the Colorado Water Conservation Board, and the Colorado Oil and Gas Conservation Commission issued a joint report estimating that fracking would account for just eight-hundredths of a percent (0.08%) of Colorado’s annual water usage—far less than what we use for recreational purposes (5.64%) and slightly more than what we use to make fake snow (0.03%).

But fracking is different—these authors claim—because the water is left in “deep subterranean cavities,” and thus fracking “permanently remove[s] billions of gallons of water from the hydrologic cycle.” This statement gives the false impression that fracking can significantly affect the hydrologic cycle. It cannot. The hydrologic cycle is not a fixed supply of freshwater, but rather a constantly recharging system that begins with the nearly infinite expanse of the oceans.

Just for fun, let’s accept the Intergovernmental Panel on Climate Change prediction that sea levels will rise by one foot during the next century. A few simple calculations show that it would take one hundred million (100,000,000) frack-jobs, each using 5 million gallons of water, to counteract the predicted one-foot rise in sea level. In other words, the oceans which serve as the starting point for the hydrologic cycle cannot possibly be affected by hydraulic fracturing in any significant way—and even if they could be affected, the general effect would be to counteract the threat of rising sea levels, which we are constantly warned about.

Some of the fracking nay-sayers, seem to concede these points, but then they go on to assert that there is still a problem. They warn that even a small additional use of water will be enough to completely dry up the system. Consider Gary Wockner’s line of reasoning:

It is true that the state of Colorado contains millions of acre feet of water, and that fracking may only need a small percentage of it. But more importantly and to the point, it is also true that fracking is a brand new use of water . . . . Fracking would certainly contribute to being the last drop in the bucket of Colorado’s rivers.

But this, too, is misleading. Every drop of water withdrawn requires, by law, approval from water permitting authorities. Furthermore, these permitting authorities cannot simply give away the proverbial “last drop.” Currently, by law, all new water uses must be balanced against current water uses. To quote the CDWR Report, “water cannot be simply diverted from a stream/reservoir or pumped out of the ground for hydraulic fracturing without reconciling that diversion with the prior appropriation system.” Claims that fracking will gobble up the last drop are just plain nonsense.

In the face of claims like those presented in this post, remember these three points:

  • Fracking would present a mere 0.08% of Colorado’s annual water usage;
  • Even though some water is left underground, the amounts of water involved cannot possibly have an appreciable effect on the hydrologic cycle, because that cycle is fueled by our massive oceans;
  • And, lastly, the added water uses from fracking will not suck the system dry, because current laws require that new uses be reconciled and balanced with current appropriations.

Stay tuned for more coverage of the specific fracking issues that you need to know about.

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