Roadblocks contributing to natural gas price hikes identified by Argonne, acted on by Congress

ARGONNE, Ill. (Feb. 10. 2006) — More than 40 roadblocks to U.S. natural gas exploration, production and transportation have been identified that may contribute to gas price hikes in a recent report by Argonne researchers. Though unlikely to affect this year's costs – which are predicted to cost on average 38 percent more than last year, according to the Energy Information Administration – Congress is already writing and passing legislation consistent with the report's findings.

While many factors contribute to higher natural gas prices, researchers in Argonne's Environmental Science Division scoured federal and state environmental laws, regulations and policies that were developed to meet environmental protection goals, but that may also constrain natural gas exploration, production and transportation. These factors can limit access to natural gas supplies, create production delays or increase costs.

"Our goal in writing Environmental Policy and Regulatory Constraints to Natural Gas Production (PDF file)," explained report author Deborah Elcock, "was to identify specific existing and potential environmental laws, regulations and policies which, while developed to meet legitimate environmental protection goals, can at the same time, constrain natural gas exploration, production and transportation."

Understanding these constraints helps decision-makers develop policies that eliminate or reduce the impacts of such constraints, set priorities for regulatory reviews, and target research and development efforts to help the nation meet its natural gas demands.

"By knowing and understanding how these constraints impact natural gas production," Elcock said, "policymakers can develop strategies to meet environmental goals without negatively impacting natural gas development. By addressing these impacts, the nation can maintain, if not increase, its ability to extract and distribute gas to users in a cost-effective and environmentally protective fashion."

For each constraint listed, the report presents the source and type of impact. When supporting data exist, the report also provides an estimate of the amount of gas affected.

Constraints include federal and state laws and regulations, presidential policies, and actions by agencies and states that implement the laws and regulations, such as the Environmental Protection Agency, U.S. Army Corps of Engineers, Bureau of Land Management, and Fish and Wildlife Service.

Examples include:

• The Coastal Zone Management Act has a consistency provision that can allow states to prohibit development already approved by the federal authorities.
• The Endangered Species Act, as interpreted by the courts, can extend protected areas, limiting development on private and federal property.
• Essential Fish Habitat Regulations have requirements that can duplicate other federal regulations and can hold up leasing or permitting.
• The Roadless Rule could prohibit road construction in one-third of the National Forest System, cutting off access to an estimated 11 trillion cubic feet of gas that could supply the nation for six months at the current consumption rate.

Congressional and presidential initiatives have created offshore drilling moratoria that deny access to offshore natural gas and, until the enactment of the Energy Policy Act of 2005, prohibited federal agencies and others from even determining the size of natural gas deposits there.

Other roadblocks occur when multiple enforcement agencies are involved, according to the study. Decisions regarding production and transportation activities often require approvals from various federal, state and local agencies before issuing permits. When more agencies are involved, approval is more complicated and takes longer.

"This concern is particularly important for interstate natural gas pipelines," Elcock said, "which are the backbones of transporting gas across the country. The Federal Energy Regulatory Commission grants certifications to build new pipelines, but only after it has received approvals from other federal, state and local agencies that also have jurisdiction."

The report was prepared for the Department of Energy's Office of Policy and International Affairs and is already being used by Congress. The Energy Policy Act of 2005, enacted in August, contains several requirements that will help mitigate some of the constraints.

"For example, the law contains a requirement to conduct a pilot program to improve federal permit coordination, in which the involved agencies are to work together to streamline the permitting process," Elcock said. "And there are bills before Congress right now to try and open up some of the offshore areas to exploration and production that are now unavailable due to moratoria."

The Environmental Policy and Regulatory Constraints to Natural Gas Production built on earlier reports. In 1999, the National Petroleum Council found that domestic resources are adequate to meet demand through 2015 but that meeting the projected demand could be difficult due to access restrictions. The council also reported in 2003 that government policies encourage natural gas use but do not address the need for additional supplies.

The Energy Policy and Conservation Act Amendments of 2000 called for an inventory of gas resources beneath federal lands to identify development restrictions. The study revealed that access to natural gas is restricted on almost two-thirds of the surveyed land.

The earlier studies identified access restrictions to gas on federal lands. The Environmental Science Division went beyond these studies to identify and examine access restrictions to drilling, production and transportation. Researchers reviewed environmental laws, regulations and policies, and how government agencies implement them. Their resources were existing studies, congressional testimony, environmental reviews and information from trade associations, public interest groups and academic studies.

Secondary sources published by the Energy Information Administration, the Department of the Interior, and Minerals Management Service provided data about the amount of gas potentially affected. — Evelyn Brown