In a fight, when an opponent is down and hurt, the rules of fair play dictate that you back away and give your foe a moment to catch their breath.
But those rules don’t apply when it comes to politics…
Even casual observers of the oil and gas industry can see that it’s hurting bad. Collapsing oil prices and very weak natural gas prices have the industry reeling.
Of course, now is when the Obama administration has chosen to move in and hit the energy industry hard with nine new regulations.
These include stricter controls on hydraulic fracturing, new rules covering oil shipments by trains, and tougher standards on offshore drilling and drilling in the Arctic, reports The Wall Street Journal.
Below is a summary of all the new regulations, most of which will come into effect this year.
At the forefront of all the coming regulations is the first-ever regulation specific to methane emissions.
Methane is the main component of natural gas and can leak into the atmosphere during natural gas production.
On January 14, the EPA laid out the target of reducing methane emissions from U.S. oil and gas production by 40% to 45% from 2012 levels by 2025.
The agency said it would come up with controls on such emissions from new and modified sources of the gas, including new oil and gas wells. It also kept the door open on whether the regulations would apply to existing wells in the future, saying older wells are subject to clean air rules if they are in areas not meeting federal ozone standards.
The EPA did not lay out specific proposals on how to meet the target yet. But details of a plan will be released this summer, with final rules set in 2016.
The main concern for the market is that laying new regulatory costs on new wells threatens to knock out the shale boom that OPEC has already put on its knees.
This begs the question of why the administration decided to impose new regulations on methane now…
A Strategic Move
After all, the industry is lowering emissions on their own, without prodding from the government.
Living in the midst of the Marcellus Shale region, I see firsthand companies, such as Cabot Oil & Gas (COG) and Southwestern Energy (SWN), installing the latest technology to detect and prevent methane leaks. Prevention is not the industries only goal, though. They also want to utilize the byproduct.
As America’s Natural Gas Alliance says, “Methane is… the product we sell and, therefore, want to capture.”
According to David Allen, a University of Texas-Austin chemical engineering professor, new emissions control equipment installed on new natural-gas wells while they’re still being constructed can reduce methane emissions by 99%.
The EPA itself said recently that methane emissions from fracking have dropped by 73% since 2011 alone. In that same time period, overall methane emissions from the industry fell by 12%!
The answer to why new regulations now is likely politics. The administration is well aware that additional regulations will raise the price of energy in our country.
Thus, what better time is there to impose costly regulations on energy than during a time of collapsing energy prices?
Fortunately, consumers won’t notice the increased costs at the gasoline pump, thanks to tumbling oil prices. After all, there’s nothing politicians fear more than Americans griping about the high price of gasoline.
This is quite a contrast, politically speaking, from our neighbor to the north.
Under similar pressure from environmentalists to further regulate the energy industry, Canada’s Prime Minister Stephen Harper said in December, “Under the current circumstances of the oil and gas sector, it would be crazy – it would be crazy economic policy – to do unilateral penalties on that sector. We are not going to kill jobs.”
And the chase continues,
P.S. Follow me on Twitter@TimMaverickWSD!