Last week, on the same day that U.S. EPA signaled it would hold off until next year in announcing whether it will pursue methane emissions regulations, New York Gov. Andrew Cuomo banned fracking in his state, citing health concerns. How much uncertainty currently exists in the natural gas sector? During today's OnPoint, Dina Kruger, co-founder of Kruger Environmental Strategies and the former director of the climate change division at EPA, discusses her expectations for the upcoming methane announcement and weighs in on the role states are playing in the regulation of fracking.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Dina Kruger, co-founder of Kruger Environmental Strategies and the former director of the Climate Change Division of U.S. EPA. Dina, thanks for coming back on the show.
Dina Kruger: Thanks for having me.
Monica Trauzzi: Dina, on the same day that EPA signaled it would hold off until next year in announcing whether it will pursue methane emissions regulations, New York Gov. Andrew Cuomo banned fracking in his state, citing health concerns. How much uncertainty currently exists in the natural gas sector?
Dina Kruger: Well, I think the decision by the state of New York to ban fracking is a very dramatic one and an important one, and it sends a signal to the regulator -- the oil and gas companies that they're going to need to really, you know, make some changes to address some of these concerns if they're going to be able to, you know, to drill in places that don't have a lot of experience with it and where, you know, the public and these communities along the Marcellus Shale are, you know, have already said they don't want it. So, you know, I think it'll -- it's not going to be something that will necessarily happen everywhere, but certainly to the extent as they move out of the oil patch and into places that don't have that kind of background in oil and gas drilling, they're going to have to be maybe a little bit more conciliatory to the public in terms of what needs to be done.
Monica Trauzzi: So what have you heard on why the administration has pushed the timeline of their announcement? Or what do you think the reason is?
Dina Kruger: Yeah, I think what's going on is it's a -- you know, based on the strategy that was put out back in March, they're coordinating among a number of different agencies. There is a significant amount -- some significant issues that need to be worked through, and we're coming up on the Christmas holiday when a lot of people and senior leadership sort of looks to have a little bit of downtime, not be around the office sort of responding to some of these kinds of questions. So I think that it makes sense for the agency to do it, and they -- to delay it, and they've said that they're going to do it in January, which will --
Monica Trauzzi: And so in January you would expect full steam ahead.
Dina Kruger: I would expect something to happen in January. I don't think that they're going to be able to push it back much farther than that.
Monica Trauzzi: This has to be really quite a balance for EPA, though, because considering the number of policies that are in place and in motion relating to natural gas, how careful does the agency need to be in keeping the regulations as workable for industry as possible?
Dina Kruger: Well, I think they will try to make those regulations as workable as they can. The big question that we have going forward is what are they -- you know, what type of a regulatory approach are they going to take? Are they going to sort of build on the 2012 regulation they did, which regulated VOCs, not methane, and methane was a co-benefit? Will they go down that route, which is necessarily limited in terms of how much methane reduction they can get because they can't really go beyond the processing plants to the downstream sources? Or will they actually change their approach and start regulating methane itself, in which case they have a lot more sources that they can regulate and they can get larger reductions.
Monica Trauzzi: And what do you think the best approach is?
Dina Kruger: Well, I think if you want to reduce methane emissions, the best approach is to regulate methane because there are -- there's just an inherent limitation when you're only doing the VOCs to the parts of the system where VOCs are emitted. So that'd be my advice if they were -- you know, if this is a methane strategy.
Monica Trauzzi: But does that help the United States stay strong, then, on energy security? Are companies then able to fully tap into the natural gas resources we have if methane is further regulated?
Dina Kruger: I don't think there's going to be a significant problem with the further regulation of methane for a couple of reasons. The first is that EPA has to make a proposal, they'll get stakeholder feedback and they'll revise that proposal to reflect concerns or new information about costs or the implications on the industry. But secondly, methane is a product that is the product. Methane is natural gas, and many of these practices that the agency has been looking at through those white papers are actually things that pay for themselves fairly quickly, so this is not an area where you're looking at, you know, large capital expenditures of long-lived equipment to try to get the emissions to come down. It's something that's much more amenable, I think, to pragmatic regulation. And you're seeing that in the states already.
Monica Trauzzi: Right. We're already seeing action on the state and local level on both fracking and methane. So then is the federal policy necessary and, if so, how much flexibility should be granted to the states in that policy?
Dina Kruger: I think a federal policy is necessary because it would level -- it levels the playing field. You know, there are some very progressive states -- Colorado, California -- that have been moving out and showing that this can be done, and the companies in those states have been supportive of these actions, not fighting them. So I think that's -- that tells EPA that it can be done and it can be done in a way that's not problematic, but it doesn't mean that every state is going to do it. I think in terms of your question about can the flexibility be provided, if they use the NSPS, it's the -- it would be a similar approach to what's going on now with the Clean Power Plan, except that I think that actually regulating methane emissions is much less complicated than what's required to regulate the electric power sector. So EPA would do a new source -- would have to propose new source requirements itself and then go to emissions guidelines for the states.
Monica Trauzzi: How successful could a voluntary approach be?
Dina Kruger: Well, I expect there will be some kind of voluntary component of this strategy as well because I'm -- I don't have the sense that EPA is going to want to bite off a complete regulation from beginning to end of the gas system at this point, given everything else that they've got on their plate. So I think that there will be a voluntary component, and it's not really clear yet what that's going to look like. They've proposed this Gas Star Gold, which is kind of an amped-up voluntary program building on something that they've been doing previously, and it's not -- but it's not clear yet. They got a lot of feedback from industry on what they propose on that front as well recently, so I think it's not clear how exactly that's going to -- where that's going to land.
Monica Trauzzi: All right. We'll end it there. Thank you for coming on the show. A lot to watch heading into January.
Dina Kruger: Certainly is. Thanks so much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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