The Economic Effects of Environmental Regulations

Posted January 30th, 2009 at 5.00pm in Energy and Environment, Enterprise and Free Markets.

Politicians and consumers learned valuable lessons this summer when national gasoline prices peaked at over four dollars per gallon. Simply put, energy supply must be expanded in the United States. Last October Congress took the right first steps by allowing the restrictions on energy leasing in 85 percent of America’s territorial waters to lapse. An estimated 30 years of imports from Saudi Arabia and enough natural gas to power American homes for 17 years could be found in these waters.

With a new president and a new Congress, we could be facing new regulations when it comes to energy production. There’s the possibility of a massive cap and trade regulation to drastically reduce carbon dioxide that would be devastating to the economy, but that’s just the beginning. In a somewhat clandestinely released report prepared for The Department of Energy, Advanced Resources International measures the economic effects of the regulations recommended by environmental groups. (Clandestine insofar as it’s extremely difficult to find on DOE’s page.) The regulations include:

• Requiring oil and gas exploration and production (E&P) operations to report to the Toxic Release Inventory (TRI).
• Subjecting hydraulic fracturing of oil and gas wells by the E&P industry to Underground Injection Control (UIC) program requirements, despite language excluding this in the Energy Policy Act of 2005.
• Requiring that all wastes associated with oil and gas exploration and production be addressed under Resource Conservation and Recovery Act (RCRA) cradle-to-grave hazardous waste provisions. This includes requiring that the underground injection of produced water and other materials associated with enhancing oil and gas production meet the standards of Class I injection.
• Requiring storm water permits for all oil and gas E&P operations, rescinding Section 323 of the Energy Policy Act of 2005.
• Requiring aggregation of the emissions of oil and gas E&P activities under the National Emission Standards for Hazardous Air Pollutants (NESHAP) program, and requiring the U.S. Environmental Protection Agency (EPA) to review and update clean air regulations related to oil and gas E&P.
• The implementation of new Spill Prevention, Control, and Countermeasure (SPCC) requirements issued by EPA to “provide increased clarity,” as well as to better “tailor” requirements to oil and gas industry operations.

And the effects of these regulations?

• 183,000 barrels per day lost, or 7 percent of U.S. lower-48 onshore oil production in the first year alone.
• 245 billion cubic feet of natural gas shut in the first year.
• 57 percent of producing onshore oil wells in the United States could be shut in, as could 35% of producing onshore gas wells.
• Overall well drilling for unconventional gas could be reduced by half.
• Compliance costs: $10 billion first year, up to $75 billion over 25 years.

The full 59-page report is available here. Also worth noting is the amount of forgone royalties and tax revenues that would result from these regulations. Page thirteen of the report has these numbers broken down by state. Texas, Pennsylvania, Oklahoma, Louisiana, New Mexico, Kansas and West Virginia are some of the biggest losers.

Many restrictions and regulations are a relic of the past. Drilling for oil has strict safeguards and state-of-the-art technology with a proven track record for limiting the risk of spills. After all, oil companies have every incentive not to be careless because doing so could severely cripple their industry and subject the industry to more stringent regulations.

Author: Nick Loris
Interact: Sphere
Share This

11 Comments

January 31, 2009 Marty Brownfield, Bakersfield CA writes:

Logic and reason in Government regulations is once again “tossing out the baby with the bath water”. Rewriting the rules will do nothing but hamper both business and regulators. There are already enough rules and regulations that are so complicated and convoluted that no one can understand them. Why add to the quagmire?

January 31, 2009 TXsharon writes:

How completely unreasonable to expect an industry that made 400 BILLION in profits last year to adhere to the same regulations required of other industries in order to protect the natural resources we can’t live without like AIR and WATER.

February 2, 2009 Thomas Gray South Carolina, writes:

Buba,, if you die from exposure when the electricity goes off or the NG or oil heater that needs power also,,, you don’t need air and water. And who says air and water will suddenly become unusable to the degree ”’you”’ are indicating.

February 2, 2009 Barbara Cooper, Arizona writes:

Just wait until our President closes those coal fields in Virginia (as he has indicated he will do)and implements the cap and trade legislation. We ain’t seen nothing yet.

February 2, 2009 kent, Virginia writes:

Welcome, America, to Obama Nation.

February 2, 2009 ChristinaK, New Jersey writes:

This is government regulation run amok. The collateral costs of environmental good intentions have crippled INDUSTRY in this country and cost billions. Just look at the DDT debacle. There have been tens of millions of unneccessary deaths from malaria due to the “ban” on DDT.Its replacement, parathion, is EXTREMELY HARMFUL, and not nearly as effective. In fact, DDT was never actually banned, but foreign countries would not receive aid from the US if they used it. These causes (Global Warming being the newest) have nothing to do with humanitarian issues and everything to do with MONEY.

February 2, 2009 Kurt,medford oregon writes:

Ditto’s to ChristinaK,you hit the nail on the head,just follow the money to find the inconvenient truth.

February 3, 2009 Thomas Gray South Carolina, writes:

Energy Electricity,

An envivonmental not just one are battaling against coal,

I understand if I’m correct that the goal here is to cause a price increase to create a more cost balanced market for wind and solar to expand but has anyone told the environmentilist we are in the midst of an econonic meltdown and to save the children of the future they are killing the people of today.

The house that I’m sitting in this moment has been disconnected from the electric power grid a number of times out of work poverty the cause, in california one can live in a house thats off the grid but not the rest of the country,

All FF’s are finite NG does not rain down from heaven.

If we build atom power THIS will end the argument with coal but it will also defeat environmental’s effort to install solar and wind but my answer to environmental is what is the great big hurry. Atom will give environmental the power and the time they need to build solar and fix the grid and the energy provided will support and employ millions of people that got TAX’S to pay also just what is the goal here. wind and solar are hard pressed to supply electricity to homes, there’s more than that needed for this country to function and it’s not going to come from FF forever.

Solar energy is something that must be built as a long term plan but the power loss is going to be upon all when the FF is gone, or for some reason becomes unafordable or unavailable.

My goal here is not to defeat wind and solar but that environmental not interfear with the available supply of some very or soon to be very expensive and some that may become unavailable rather quickly resources and also those that are less expensive, and some that are in the best interest of the U.S as a nation to have online and operating that are not subject to other powers in other country’s will. Does anyone think all the world loves snotty rich people that got nothing better to do than to seek to rule the U.S.A by mandate ?.

The works of man are evil, I expect nothing less from any. Open your eyes by my lord and look to yourselves, why cast yourselves into eternal punishment, evil will go into that punishment for what it does but man need only consider his way’s and change a little if only able at first and possably live forever so my lord taught many. By your current goal at some point if not already in time someone will die becouse the cost of electricity is or will be to great and supply from the grid stoped for non payment, and the deaths of those people are being caused by those who are guilty of causing the cost of electricity to rise above their ability to pay. I will say in your defence it’s not likely that many will die by this but the guilt is upon environmental and not me at least for this sin and again only one in defence of my adversary’s goal.

My lord has commanded me and all who seek his kingdom and eternal life, thou shalt not kill,

The law of my lord says see thou slay not the innocent for I will not justify the wicked.

Slay thou not the innocent for I wil not justify the wicked.

February 3, 2009 Dannvig, Arizona writes:

This is what happens when we move from being CONSERVATIONISTS to ENVIRONMENTALISTS. I am for conserving resources and thier wise use, but I don’t worship the earth as a diety. ( My mother is living in SD )

February 3, 2009 Fred Bielat, Niles IL writes:

I wish I understood what Thomas was driving at…wow!

Sharon! Those profits are distributed to investors. People who pay for their children to go to school, pay for healthcare, retire in a pleasant existance after a lifetime of hard work. Perhaps you even benefited through a 401K or pension plan. Its likely you did indirectly and may not even know it. But lets take that a step further. In light of the fact that a new refinery has not been built since the 1970’s, these companies are in a perfect position to spend this “evil” money to build new refineries and drill for more domestic oil. With all the new technology at their disposal, they can do this extemely safely and not damage the environment. Get the enviro-nuts and the archaic regulations out of their way and let them spend the money on moving the economy forward. $400 billion is a drop in the bucket compared with what it will take to subsidize (out of your pocket) inefficient alternative sources. Windmills and Sunshine will not get you out of this situation…but don’t stop trying! Just don’t jump too soon.

February 3, 2009 chuck, pine bluffs wyoming writes:

You are all right, we need sun, coal, wind, water, NG, and nuke power. Anyone by themselve is not going to meet the demands of industry. Only combined can this be done, but do it smartly.
The tech is there, useing it will cost, so whose going to pay?

The Heritage Foundation - Leadership for America

The Foundry