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Fracking Regulation Overkill; Time to Talk?

Constitution Pipeline - MarkindDaniel B. Markind, Esq.
Weir and Partners, LLP

 

Fracking regulation in Pennsylvania has swung like a pendulum. It’s time to talk and craft reasonable rules that allows the industry to move ahead.

The Marcellus Shale Coalition has filed a Petition for Review in Commonwealth Court challenging the new oil and gas regulations enacted by the Pennsylvania Department of Environmental Protection and the Environmental Quality Board and known generally as the Chapter 78a Regulations.  It’s the latest evidence of failure by all parties involved in figuring out a process to work together for the good of the entire State. 

The energy industry overreached  under the Corbett Administration, almost inviting public derision by pushing provisions in Act 13 such as the medical gag order.  Once in office, the Wolf Administration returned the favor with absurd tax claims and abuse of the regulatory process to develop the Chapter 78a Regulations.  As I’ve said repeatedly, some of these Regulations are common sense, some are workable and some just ridiculous.

It is this kind of talking past each other that prompted my last post – about using our fundamental principles to find a way to talk to each other again instead of just using threats and litigation.  Hopefully, the MSC move is a tactic and discussions will occur behind closed doors with the DEP and the EQB about revising the Regulations to make them work for all.  We are just two weeks before Election Day, so I doubt any serious discussions can take place now, but afterward the landscape may be different.

trainwreck

One thing is clear.  The election is going to be a train wreck.  Both major parties are at odds as much with themselves as with the other party.  Expect both internal and external bitterness from both sides no matter what happens.  We can either continue on the same path, leading nowhere, or start working together.  Let’s hope both the industry and the Commonwealth’s elected representatives and administrators take the latter approach.

On November 8, one of the results to watch will be in Monterey, California.  “Measure Z” would ban fracking, seek to ban all new wells, phase out land uses in support of wastewater impoundment and injection, and completely prohibit wastewater impoundment and injection within 5 to 15 years.  While couched in terms of environmental protection regarding the industry, the leading proponents of Measure Z make little attempt to hide the fact that they seek to stop the industry entirely in Monterey.  Fracking in not currently used there.  The real issue seems to be protecting the aquifers – which show no contamination from oil industry practices but which the environmental groups feel are insufficiently monitored. 

fracking seal_of_monterey_county_californiaIn typical recent American tradition, their method to counteract this is an over-broad ballot initiative, parts of which even County Counsel admits may be preempted by State law.  If Measure Z passes, get ready for years of litigation.  If the industry is forced out, County Auditor Controller Mike Miller estimates the County would lose $8,700,000 annually in property taxes and suffer a “negative impact on financial activity.”  There clearly is no way economically to measure the County’s beauty and natural resources, but again I can’t help but believe there is a better way to do things.

Back in the Northeast, the Atlantic Sunrise Pipeline project continues to run into headwinds.  On October 13, FERC announced it would give landowners until November 14 to comment on new route alternatives in Pennsylvania.  Shares of both Williams Corporation and Cabot Oil and Gas, heavily invested in the project, fell following the news.  The FERC decision means additional delays shipping gas from Northeastern Pennsylvania to some of the most densely populated parts of the country.  According to Bloomberg, this adds uncertainty but does not yet constitute material slippage for the pipeline project.

As we head into our Presidential election, the overall situation seems as follows:  Winter is approaching and the oil and gas glut has lessened, if not ended.  Prices are rebounding, which is good for producers but not great for individual homeowners.  New England remains significantly dependent on gas from Yemen (Really?  Do you New Englanders know what is going on in that country?) while gas imports remain critical for many parts of the Mid-Atlantic despite the presence of immense gas deposits just two hours away.

Vladimir Putin sent his warships through the English Channel in his latest bit of defiance to what he believes is a feckless West, and Russian media warns of World War III.  Europe has little alternative to Russian gas supplies, so don’t expect brave responses coming from the Continent to Russian expansionism.

The country with the world’s largest oil reserves, Venezuela, is in complete turmoil as its National Election Council voided an attempted recall petition against President Nicolas Maduro.  The Vatican has now intervened and opposition groups are being pressured to join talks which they believe will be a ruse.  Meanwhile, the oil industry grinds to a halt, the economy collapses and the people starve.

Saudi Arabia is floating a $17B bond issue, laying bare the pressure on its State finances caused by the shale revolution.  Facing an ascendant Iran freed from sanctions following the, shall we say “questionable” nuclear deal, Saudi Arabia has begun tilting its policy.  The Saudis halted funding to the Palestinian Authority earlier today.  Yesterday, they reiterating their determination to expose and end Hezbollah terrorism (which they see as assisting the restive Shia minority in the Saudi east).  What seems possible is an Egypt, Jordan, Saudi Arabia, Israel axis in the Middle East, but at least publicly the Obama Administration has done little to assist that.  Will the next administration pick up on this given the current one’s preoccupation with its Iran deal? 

And, finally there’s China, which continues to build man-made islands and make bellicose claims in the South China Sea.  China could begin examining long-unexplored energy sources there which may be the underlying reason for its aggressive actions.  The Chinese feel there may be 100B barrels of oil and hundreds of trillions of cubic feet of natural gas in the area.  China may have a partner in the Philippines, whose President Rodrigo Duterte literally cursed President Obama.  The US is responding by sending warships right near the disputed Chinese islands, and the Council of Foreign Relations now describes the prospect of an armed conflict in that region as “significant.”

Remember, energy is everything.

Do you think any of this might have been good for us to discuss during the political campaign? 

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