Tuesday, October 09, 2012

GAO Reports On Unconventional Oil & Gas & Shale Development

Oct 5: The Government Accountability Office (GAO) has released a major 241-page report entitled, Unconventional Oil and Gas Development Key Environmental and Public Health Requirements (GAO-12-874, Sep 5, 2012). The report was requested by a number of Democratic environmental leaders in the House and Senate including: Senator Barbara Boxer (D-CA), Chairman Committee on Environment and Public Works; and Representatives Henry Waxman (D-CA) and Ed Markey (D-MA); and others.

    In background information, GAO indicates that technological improvements have allowed the extraction of oil and natural gas from onshore unconventional reservoirs such as shale, tight sandstone, and coalbed methane formations. Specifically, advances in horizontal drilling techniques combined with hydraulic fracturing (pumping water, sand, and chemicals into wells to fracture underground rock formations and allow oil or gas to flow) have increased domestic development of oil and natural gas from these unconventional reservoirs. The increase in such development has raised concerns about potential environmental and public health effects and whether existing federal and state environmental and public health requirements are adequate.

    GAO was asked to review environmental and public health requirements for unconventional oil and gas development and: (1) describe Federal requirements; (2) describe state requirements; (3) describe additional requirements that apply on Federal lands; and (4) identify challenges, if any, that Federal and state agencies reported facing in regulating oil and gas development from unconventional reservoirs. GAO identified and analyzed Federal laws, state laws in six selected states (Colorado, North Dakota, Ohio, Pennsylvania, Texas, and Wyoming), and interviewed Federal and state officials and representatives from industry, environmental, and public health organizations.

    GAO found that as with conventional oil and gas development, requirements from eight Federal environmental and public health laws apply to unconventional oil and gas development. For example, the Clean Water Act (CWA) regulates discharges of pollutants into surface waters. Among other things, CWA requires oil and gas well site operators to obtain permits for discharges of produced water -- which includes fluids used for hydraulic fracturing, as well as water that occurs naturally in oil- or gas-bearing formations -- to surface waters. In addition, the Resource Conservation and Recovery Act (RCRA) governs the management and disposal of hazardous wastes, among other things. However, key exemptions or limitations in regulatory coverage affect the applicability of six of these environmental and public health laws. For example, CWA also generally regulates stormwater discharges by requiring that facilities associated with industrial and construction activities get permits, but the law and its regulations largely exempt oil and gas well sites. In addition, oil and gas exploration and production wastes are exempt from RCRA hazardous waste requirements based on a regulatory determination made by U.S. EPA in 1988. EPA generally retains its authorities under Federal environmental and public health laws to respond to environmental contamination.

    All six states in GAO's review implement additional requirements governing activities associated with oil and gas development and have updated some aspects of their requirements in recent years. For example, all six states have requirements related to how wells are to be drilled and how casing -- steel pipe within the well -- is to be installed and cemented in place, though the specifics of their requirements vary. The states also have requirements related to well site selection and preparation, which may include baseline testing of water wells before drilling or stormwater management.

    Oil and gas development on Federal lands must comply with applicable Federal environmental and state laws, as well as additional requirements. These requirements are the same for conventional and unconventional oil and gas development. The Bureau of Land Management (BLM) oversees oil and gas development on approximately 700 million subsurface acres. BLM regulations for leases and permits govern similar types of activities as state requirements, such as requirements for how operators drill the well and install casing. BLM recently proposed new regulations for hydraulic fracturing of wells on public lands.

    Federal and state agencies reported several challenges in regulating oil and gas development from unconventional reservoirs. EPA officials reported that conducting inspection and enforcement activities and having limited legal authorities are challenges. For example, conducting inspection and enforcement activities is challenging due to limited information, such as data on groundwater quality prior to drilling. EPA officials also said that the exclusion of exploration and production waste from hazardous waste regulations under RCRA significantly limits EPA's role in regulating these wastes. In addition, BLM and state officials reported that hiring and retaining staff and educating the public are challenges. For example, officials from several states and BLM said that retaining employees is difficult because qualified staff are frequently offered more money for private sector positions within the oil and gas industry. GAO did not make recommendations. In commenting on the report, agencies provided information on recent regulatory activities and technical comments.

    GAO release a second, related 70-page report entitled, Oil and Gas Information on Shale Resources, Development, and Environmental and Public Health Risks (GAO-12-732, Sep 5, 2012). The report was requested by the same Democratic leaders.

    In background for the second report, GAO indicates that new applications of horizontal drilling techniques and hydraulic fracturing--in which water, sand, and chemical additives are injected under high pressure to create and maintain fractures in underground formations--allow oil and natural gas from shale formations (known as "shale oil" and "shale gas") to be developed. As exploration and development of shale oil and gas have increased--including in areas of the country without a history of oil and natural gas development--questions have been raised about the estimates of the size of these resources, as well as the processes used to extract them.

    GAO was asked to determine what is known about the: (1) size of shale oil and gas resources and the amount produced from 2007 through 2011; and (2) environmental and public health risks associated with the development of shale oil and gas. GAO reviewed estimates and data from Federal and nongovernmental organizations on the size and production of shale oil and gas resources. GAO also interviewed Federal and state regulatory officials, representatives from industry and environmental organizations, oil and gas operators, and researchers from academic institutions.

    GAO found that estimates of the size of shale oil and gas resources in the United States by the Energy Information Administration (EIA), U.S. Geological Survey (USGS), and the Potential Gas Committee -- three organizations that estimate the size of these resources -- have increased over the last 5 years, which could mean an increase in the nation's energy portfolio. For example, in 2012, EIA estimated that the amount of technically recoverable shale gas in the United States was 482 trillion cubic feet--an increase of 280 percent from EIA's 2008 estimate. However, according to EIA and USGS officials, estimates of the size of shale oil and gas resources in the United States are highly dependent on the data, methodologies, model structures, and assumptions used to develop them. In addition, less is known about the amount of technically recoverable shale oil than shale gas, in part because large-scale production of shale oil has been under way for only the past few years. Estimates are based on data available at a given point in time and will change as additional information becomes available. In addition, domestic shale oil and gas production has experienced substantial growth; shale oil production increased more than fivefold from 2007 to 2011, and shale gas production increased more than fourfold from 2007 to 2011.

Oil and gas development, whether conventional or shale oil and gas, pose inherent environmental and public health risks, but the extent of these risks associated with shale oil and gas development is unknown, in part, because the studies GAO reviewed do not generally take into account the potential long-term, cumulative effects. For example, according to a number of studies and publications GAO reviewed, shale oil and gas development poses risks to air quality, generally as the result of: (1) engine exhaust from increased truck traffic, (2) emissions from diesel-powered pumps used to power equipment, (3) gas that is flared (burned) or vented (released directly into the atmosphere) for operational reasons, and (4) unintentional emissions of pollutants from faulty equipment or impoundments -- temporary storage areas. Similarly, a number of studies and publications GAO reviewed indicate that shale oil and gas development poses risks to water quality from contamination of surface water and groundwater as a result of erosion from ground disturbances, spills and releases of chemicals and other fluids, or underground migration of gases and chemicals. For example, tanks storing toxic chemicals or hoses and pipes used to convey wastes to the tanks could leak, or impoundments containing wastes could overflow as a result of extensive rainfall.

    According to the New York Department of Environmental Conservation's 2011 Supplemental Generic Environmental Impact Statement, spilled, leaked, or released chemicals or wastes could flow to a surface water body or infiltrate the ground, reaching and contaminating subsurface soils and aquifers. In addition, shale oil and gas development poses a risk to land resources and wildlife habitat as a result of constructing, operating, and maintaining the infrastructure necessary to develop oil and gas; using toxic chemicals; and injecting fluids underground. However, the extent of these risks is unknown. Further, the extent and severity of environmental and public health risks identified in the studies and publications GAO reviewed may vary significantly across shale basins and also within basins because of location- and process-specific factors, including the location and rate of development; geological characteristics, such as permeability, thickness, and porosity of the formations; climatic conditions; business practices; and regulatory and enforcement activities.

    Access the complete Unconventional Oil & Gas report (click here). Access the second report on Shale Resources (click here). [#Energy/Frack, #Energy/OilGas, #Energy/Shale]