RFF ON THE ISSUES: BLM fracking regulations; Energy efficiency in buildings; European emissions fall
In this edition:
- Comments on BLM’s new fracking regulations
- Improving energy efficiency in buildings
- A policy option for the EU Emissions Trading System
BLM Fracking Regulations
The Bureau of Land Management (BLM) recently released the “first federal fracking rules” since the US shale boom began. The rules apply to oil and gas producers who drill on public land. In a new blog post, RFF’s Alan Krupnick writes: “Our rapid assessment is that, other than for the requirement of frack tanks … no new ground is being broken vis-à-vis the states as a whole … all that can be said in general is that with state regulations extremely heterogeneous and the ground shifting so quickly, BLM’s regulations are more stringent for some states and less stringent for others.” Read More
This post originally appeared on Robert Stavins’s blog, An Economic View of the Environment.
Recently I was reminded of the controversy that erupted late in 2014 about remarks made by the distinguished health economist, Jonathan Gruber, professor at MIT for two decades. Professor Gruber, one of the country’s leading experts on health policy, had played an important role in the construction of the Obama administration’s Patient Protection and Affordable Care Act, subsequently derided by its political opponents as “Obamacare.”
A brief but intense political controversy and media feeding-frenzy erupted when videos surfaced in which Professor Gruber – largely in a series of academic seminars and conferences – explained how the Act was crafted and marketed in ways that would make it easier to develop political support. For example, he noted that insurance companies were taxed instead of patients, fundamentally the same thing economically, but vastly more palatable politically. He went on to note that this was possible because of “the lack of economic understanding of the American voter.” His key point was that the program’s “lack of transparency is a huge political advantage.” Is that a controversial or even unique observation?
A Truism of Political Economy
Any economist who has worked on the development or analysis of public policy – in areas ranging from health care policy to environmental policy to financial regulation – recognizes the truth of the key insight Gruber was communicating to his audiences. It is inevitably in the interests of the advocates of a policy to make the policy’s benefits transparent and to make its costs vague, even unobservable; just as it is in the interests of the opponents of a policy to make that policy’s benefits obscure and its costs as clear as the light of day. Read More
Today the United States Bureau of Land Management (BLM) released their long awaited final rules on hydraulically fracked wells on federal land after two rounds of proposed rules in 2012 and 2013 proved highly contentious. In our article on the 2013 proposed rules, we hoped BLM rules would be a model for states to follow, but concluded that they backed off of more stringent regulations in 2012 and that the BLM rules didn’t break new ground, being more stringent than some states and less in others.
Is three times a charm?
Let’s go through what BLM says is “new.” From an environmentalist perspective, the requirement for frac tanks to store waste fluids as opposed to keeping open the use of lined pits is a step forward, going beyond nearly all state regulatory practice. But the data show that there are risk-risk tradeoffs. Tanks in tornado alley are probably a bad idea, and have been not infrequently used as target practice. But tank leaks and spills are easier to monitor and not vulnerable to rainy weather. With the industry moving to mobile storage tanks anyway, and with exceptions able to be made (in tornado alley?), the rule seems reasonable. One concern is that the exceptions are to be “limited and rarely granted” and not on cost grounds.
The requirement to submit details about the geology and fracking plans before drilling is a very good idea, so long as BLM has criteria to reject some plans and enough personnel to make reviews serious rather than pro forma. This provision also comes with a plan to distribute the data to the public on the web site, although the details remain to be worked out. Another great idea, but execution is critical.
There are a few provisions about casing and cementing as well as well integrity testing and reporting. Plans in these areas do not require approval, however, and criteria for deciding when inadequacies or bad test results show up are not provided. The requirement for a successful mechanical integrity test prior to fracking is a step towards lower risks compared with current regulation, but has been overtaken by best practice and state regulation.
There are several rules which return to the generally more stringent 2012 proposal. Most important is the requirement that testing be carried out on each well. The 2013 rules permitted well sampling among wells with similar specifications and geologic parameters.
Finally, the BLM is now requiring fracking fluid disclosure after completions through FracFocus, the reporting tool set up by the Groundwater Protection Council with funding from the US Department of Energy. As FracFocus improves, this strategy will look better and better. The 2012 rules asked for disclosure before the drilling began, but BLM argued that the actual mixture used was a field decision. There are still exceptions for trade secret protection, which can be granted via an affidavit attesting for the need – an approach that appears no different than the 2013 rules but weaker than in 2012 where chemical information would have had to be submitted to substantiate claims.
How do these rules stack up against the states’ rules? Read More
If I want to know the calorie content of a candy bar or whether a new sweater requires hand washing, I can just look at the label before I buy. Similarly, if I want to know the operating costs for a new refrigerator, I can study the Energy Guide, a federally mandated label for all appliances. But if I’m considering renting space in a 20-story downtown office building, I might have a hard time finding out what to expect in terms of the energy bills. Some signals may exist—perhaps I can see that the windows are new and the building owner discloses the age of the heating and cooling system. Or maybe the building is Energy Star or LEED certified. But suffice it to say that the information will be imperfect, difficult to verify, and probably insufficient if energy costs are important in my leasing decision. Read More
A new study appearing in Nature Climate Change (of which I am a coauthor) explores how institutional considerations of risk affect the cost of large-scale investments in the power sector that increase or reduce carbon dioxide emissions. Unlike previous studies that assume uniform costs for investments, we apply financial charges that vary from country to country and for different technologies. We find that these differences significantly increase overall costs of mitigation (up to 40 percent globally), and even more dramatically alter the pattern of regional effort (with increases up to 100 percent in developed countries with lower investment risk). These results further highlight the challenges facing climate negotiators working to create a long-term, comprehensive post-2020 agreement this year in Paris.
Previous studies assume that firms throughout the world have access to technology and finance at the same cost. However, in the real world, that is not the case. Financial charges vary significantly from country to country depending, for example, on the integrity of judicial systems and the competence and credibility of public administration. Investments in currently non-commercial or politically challenged technologies—such as carbon capture and storage and, in some nations, nuclear power—bear higher financial charges. Read More
In this edition:
- An upcoming RFF First Wednesday Seminar on offshore energy leasing in the Arctic
- RFF climate research featured as part of the US Climate Resilience Toolkit
Arctic Drilling Plans
Shell has announced that it will proceed with its Arctic drilling plans, “assuming timely approval from the US federal government.” The company has spent significant time and money on oil exploration in Alaska’s Chukchi and Beufort Seas, acknowledging that “technical, fiscal, regulatory, [and] political” issues may still affect its Arctic development efforts.
Next month’s RFF First Wednesday Seminar on April 1, co-hosted with the Stanford Woods Institute for the Environment, will highlight efforts by the Obama administration to develop a targeted leasing model and drilling standards tailored to the Arctic. Experts will discuss the strengths and weaknesses of these regulations and the broader framework needed to support integrated Arctic management and prudent development. Register to attend in person or watch the live webcast. Read More
In this edition:
- Commentary on proposed changes to Colorado’s hydraulic fracturing practices
- Recommendations for reducing financial risk through climate investments
Colorado Task Force Recommendations
The Colorado Oil and Gas Task Force created to “resolve land-use conflicts” between residents and oil and gas companies has submitted nine recommendations to the state’s governor. The group supported changes giving locals the opportunity to offer input on drilling projects, but “stopped short of supporting proposals to give any more power to local governments.” Read More
Congestion pricing and driving restrictions offer two different ways for policymakers to address traffic congestion: the former levies fees individuals who drive into or within a designated “charging zone,” while the latter enforces “road-space rationing” (usually based on a car’s permit color or license plate number). Transportation experts strongly recommend the use of congestion pricing due to its efficacy and environmental benefits—so why do many cities choose to implement driving restrictions instead?
Equity concerns have been the biggest obstacle to the adoption of congestion-based pricing, which is seen as less fair to low-income drivers—and thus, less politically appealing—than a rationing system. Despite these concerns, existing evidence on the equity effects of congestion pricing has come only from developed countries, where even low-income individuals often own a car and drive to work. In a new RFF discussion paper, “Who Will Be Affected By A Congestion Pricing Scheme in Beijing?,” I work with my RFF colleague Joshua Linn and Lunyu Xie of Beijing’s Renmin University to examine the distributional consequences of a congestion pricing scheme currently under consideration in China, offering a glimpse into its effects on drivers in countries with developing economies. Our findings suggest that the burden of congestion pricing in Beijing would fall most heavily on wealthy and privileged drivers. Read More
Each week, I review the papers, studies, reports, and briefings posted over at the RFF Library Blog.
Colorado Oil and Gas Task Force Final Report
[AP] …[Governor] Hickenlooper spoke on the same day that his oil and gas task force submitted nine recommendations for easing tension created by the oil and gas industry in the state, often when wells are drilled near homes and schools… – via the Keystone Center for the Colorado Oil and Gas Task Force
Anthropogenic Warming has Increased Drought Risk in California
California is currently in the midst of a record-setting drought. The drought began in 2012 and now includes the lowest calendar-year and 12-mo precipitation, the highest annual temperature, and the most extreme drought indicators on record. The extremely warm and dry conditions have led to acute water shortages, groundwater overdraft, critically low streamflow, and enhanced wildfire risk. Analyzing historical climate observations from California, we find that precipitation deficits in California were more than twice as likely to yield drought years if they occurred when conditions were warm. We find that although there has not been a substantial change in the probability of either negative or moderately negative precipitation anomalies in recent decades, the occurrence of drought years has been greater in the past two decades than in the preceding century… - via Proceedings of the National Academy of Sciences by Noah S. Diffenbaugh, Daniel L. Swain and Danielle Touma
Double Impact: Why China Needs Coordinated Air Quality and Climate Strategies
[From Website] …this paper examines China’s current approach to tackling air pollution and carbon mitigation nationally and argues that more incentives are needed if China hopes to meet its “peak carbon” goal by 2030. – via Massachusetts Institute of Technology | Tsinghua University in Beijing / by Valerie J. Karplus
Delivering the Goods: Making the Most of North America’s Evolving Oil Infrastructure
[Oil and Gas Journal] The US crude oil renaissance has created strong demand for expanded US transportation systems, resulting in five primarily challenges, a recent Center for Strategic and International Studies report concluded. – via Center for Strategic and International Studies / by Frank A. Verrastro, Michelle Melton, Sarah O. Ladislaw, Lisa Hyland and Kevin Book
2014 Integrated Energy Policy Policy Update [Transforming California’s Transportation System to Meet Climate Goals]
[Green Car Congress] The California Energy Commission adopted its 2014 Integrated Energy Policy Report (IEPR) Update, which outlines, among many things, how the state is working to transform the transportation system to zero- and near-zero technologies and fuels to meet its climate and clean air goals. This report highlights the importance of incentives in helping speed this transition and specifically explores the role Assembly Bill 8, which makes more than $2 billion available for public investment, can play in helping to achieve this progress. - via California Energy Commission
Colorado Governor John Hickenlooper deserves some credit for creating the state’s Oil and Gas Task Force as a means of reducing the heat around the November ballot. In an effort to cool tensions among Colorado’s oil and gas industry, some local governments, and citizen groups, and as part of a deal to create the task force, a handful of controversial initiatives were withdrawn. Those included a requirement for a 2,000 foot setback from homes (currently 500 feet) and the addition a local environmental bill of rights to the state constitution. Industry-supported measures to withhold oil and gas revenues from communities that ban drilling and to require fiscal impact analysis on all initiatives were also pulled back.
After five months of deliberations, the stakeholder-based task force has issued 9 recommendations to address community concerns with shale gas and tight oil development in the state. Out of 36 recommendations voted on, 7 of the 9 issued were unanimous among the 21-member task force and 2 passed with the required two-thirds majority. Read More