Up to 14 federal agencies may need to be involved in the building of US gas pipelines. (BP plc)

Regulation is a major factor in determining whether the United States can take advantage of its new-found competitive edge in gas and oil recovery technology, business experts have said.

Federal permitting procedures, often involving multiple agencies, have become “one of the most vexing processes ever created”, Ross Eisenberg, vice president for energy and resources policy at the National Association of Manufacturers, told a panel last week in an American Petroleum Institute-sponsored Vote 4 Energy event in Washington DC.

Environmental impact

Christopher Guith, vice president for policy at the Institute for 21st Century Energy in the US Chamber of Commerce, cited environmental impact statements (EIS) for energy projects among permitting challenges. When the National Environmental Policy Act of 1969 was first implemented, an EIS took a few months to complete, said Guith. Now, the average time is three and a half years.

Both Guith and Eisenberg said the average does not count many small projects that simply give up early because they cannot sustain investment for such a long period.

As federal agencies have grown since 1969, so have EIS requirements, said Guith, noting the capital costs of delay mean renewable energy projects fall by the wayside as often as conventional projects.

Energy businesses frequently complain the EIS has become a vehicle for environmental advocates to halt projects by provoking costly procedural delays. Environmentalists say their complaints are legitimate, and they are demanding broader environmental studies that could delay new hydraulic fracturing operations.

‘American approach’

John Larson, vice president for public sector consulting at IHS Global Insight, said the regulatory framework must better address the “unique American approach” that has produced the recent gas and oil shale booms.

Larson cited private ownership of mineral rights, capacity to innovate, and availability of capital as key factors differentiating the US from other markets. That combination allowed the gas and oil industries to grow during the recent recession, Larson said, adding 1% to the national GDP during that period.

Owen Kean, of the American Chemical Council, said the abundance of gas and NGLs means that, for the chemical industry, the US is “the place to be”. Some $40 billion of new investment is coming into the country, he said, as low feedstock and energy costs give US-based manufacturers the ability to produce at half the price of competitors.

Eisenberg agreed that lower energy costs from abundant gas are a boost to manufacturing in general, but cautioned that legal and regulatory issues such as taxes, torts, environment and trade law could weigh against locating in the US.

Getting gas to market

Larson, co-author of an IHS study on the shale revolution’s effects on the US economy, said the industry faces two “big challenges” in addition to ensuring a workable regulatory framework: getting products to market and managing community impacts.
The industry lacks infrastructure to take new gas and oil to market.

About half of all gas well permits in Pennsylvania are not being used because there are no pipelines available. Pennsylvania had to import 70% of the gas it consumed in 2011 because of a lack of pipelines between the new gas fields and cities, despite producing more than 28 billion cubic metres, Guith said.

A lack of gathering pipelines has resulted in drillers flaring gas in oil fields and shipping oil by rail out of North Dakota’s Bakken shale and even Texas’ Permian Basin.

Gas pipelines in interstate commerce are regulated by the Federal Energy Regulatory Commission. They usually take two to three years to permit, site and build, and that process is held up in the business as a model of efficiency for oil pipelines, which are slightly more complicated.

Pipelines are being built for new fields, Guith said, but “it’s just going to take time”.

Most difficult for any pipeline is routing. States and the federal government allow builders to take routes by eminent domain under varying circumstances, but local resistance to all drilling can mushroom around forced land takeovers. Some US communities have pre-emptively banned drilling.