Obama and House Republicans moving swiftly for natural gas exploration

picture: seekingalpha.com
Expansion of the National Petroleum Reserve in Alaska get's the "OK" from President Obama. At the same time, House Republicans are passing oil and gas legislation at record rates. So far this term, the House has passed four pieces of legislation that would make it easier for oil and gas companies to conduct natural gas exploration.

One of the most popular ways of extracting natural gas in the Marcellus Shale is by using the hydraulic fracturing method ("fracking") --- a method where a mixture of sand, water and chemicals are used to fracture the bedrock, allowing pressurized natural gas to escape. Fracking is controversial because of the several environmental and social consequences that are attributed to it.

Covering just about every type of environmental media (air, land, water, etc.), fracking negatively impacts the environment. It's an industrial process just like coal mining and petroleum exploration; it's supposed to be messy! Since it's obvious that we still haven't found a way to do it cleanly, and in environmentally-friendly manner, why are we rushing to extract all of this natural gas?

Several reasons: (i) gas prices are rising and they're rising quickly (consumers are making strong push); (ii) there's a lot of money to be made on natural gas extraction; (iii) industry lobbying on federal AND state levels; (iv) "independence from foreign oil" (aka national security issues); and (v) industry is moving faster than the rate of regulation.

Take (v) in New York, for example. Right now, New York does not have comprehensive regulations that sets standards for the natural gas exploration industry. Instead, New York relies on a General Environmental Impact Statement, which provide broad, non site-specific, guidelines with no teeth. There is essentially no oversight over this practice and will be, for the most part, unregulated. It's the old "industry can regulate itself" theory. This is not by accident either. Industry has played an influential role in lobbying for pro-exploration legislation.

For example, industry was integral in the New York Legislature instituting its "compulsory integration" law. This law does not allow landowners an opportunity to opt-out, but instead forces them to give up their land. Landowners have 3 integration options: (1) not invest, get a small percentage; (2) not invest, but possibly incur costs, get a bigger percentage; (3) invest, get biggest percentage. Landowners have no opportunity to opt out. If the well is dry, you will not be compensated...talk about your regulatory taking.