By Jonathan Leff and Joshua Schneyer
NEW YORK Dec 28 The past four years of U.S.
environmental regulation was marked by a crackdown on emissions
that angered coal miners and power companies. Over the next
four, the new head of the Environmental Protection Agency will
have to decide whether to take on an even larger industry: Big
Following Lisa Jackson's resignation on Wednesday, her
successor will inherit the tricky task of regulating a drilling
boom that has revolutionized the energy industry but raised
fears over the possible contamination of water supplies.
The controversial technique at the center of the boom,
hydraulic fracturing, involves injecting millions of gallons of
water laced with chemicals deep into shale rocks to extract oil
and gas. It has become a flashpoint issue, putting the EPA --
charged with safeguarding the nation's water -- in the middle of
a fight between environmentalists and the energy industry.
Both sides now eagerly await a major EPA research project
into fracking's effects on water supplies due in 2014, as well
as final rules on issues including the disposal of wastewater
and the use of 'diesel' chemicals in the process.
It is unclear who will take the role, but the incoming chief
may have a "huge impact" on the oil and gas industry, says
Robert McNally, a White House energy adviser during the George
W. Bush administration who now heads the Rapidan Group, a
On the one hand, energy industry and big manufacturers are
warning the EPA not to impede a drilling boom that offers the
promise of decades' worth of cheap energy. Meanwhile,
environmentalists are pressing President Barack Obama to ensure
the drilling bonanza is not endangering water resources.
"This administration clearly needs contributors to economic
growth for its economic legacy as much as it needs to add to its
environmental legacy," said Bruce Bullock of the Maguire Energy
Institute at Southern Methodist University in Dallas.
"This appointment could be key in seeing which of those two
legacies is more important."
There are many contenders for the role, but no clear
front-runner as yet. Obama may seek an insider to avoid a
difficult confirmation process, with possible candidates
including Bob Perciasepe, the EPA deputy administrator and
interim chief, and Gina McCarthy, who runs the air quality
Obama is unlikely to win Congressional approval for a
heavy-handed regulator, and there is no suggestion of a
Even Jackson, who suffered withering criticism from big
industry and Republicans for her efforts to curb pollution and
limit greenhouse gas emissions, has cautiously condoned the
practice as safe, while acknowledging the need for greater study
and, in some cases, oversight.
"(Fracking technology) is perfectly capable of being clean,"
Jackson said in February. "It requires smart regulation, smart
rules of the road."
Jackson's successor may now be charged with refining those
rules, and both energy companies and fracking critics are
anxious about the outcome.
Industry body Independent Petroleum Association of America
said the EPA has "hindered development" of oil and gas for four
years, and looks forward to a new chief who will promote energy
drilling "hand in hand" with environmental regulation.
Executive director of the Sierra Club environmental group
Michael Brune says the EPA has "unfinished business" in
addressing things such as the release of methane emissions
APPETITE TO REGULATE
Some analysts say Obama will not risk the economic stimulus
of cheaper, domestic energy by pushing for tougher regulations.
The oil sector is one of the few bright spots in the U.S.
economy; natural gas prices are near their lowest in a decade, a
boon for manufacturers, and U.S. oil output is the highest in 18
"Even before (Jackson's resignation) there didn't seem to be
much of an appetite in the White House to regulate shale
drilling on a federal level in the next couple of years," says
Nitzan Goldberger, U.S. energy policy analyst with Eurasia
But big drillers such as ExxonMobil and Chesapeake
who have plowed billions of dollars into shale fields
are watching carefully for any sign of new rules or oversight.
Mark P. Fitzsimmons, a former lawyer in the Department of
Justice's environmental division, and now a partner at Steptoe &
Johnson LLP in Wash DC, says there is "a risk of
overregulation." Some drilling activity has already slowed
sharply this year due to the slump in natural gas prices.
"Regulatory overlays that add to the cost of production will
further slow down development" but won't stop it, he said.
While fracking technology has been around for decades, it
has only gained widespread use across dozens of states in recent
years. The EPA, like many groups, has struggled to keep up with
the expansion, according to Government Accountability Office
reports released earlier this year.
After years in which states were mostly responsible for
regulating onshore drilling, the new EPA administrator will be
pressed to take a more central role.
A year ago, in the first U.S. government report of its kind,
the EPA drew a potential link between water contamination in
rural Pavillion, Wyoming and fracking, based on samples of
ground water from the area. That study has been contested, and
subsequent research has been inconclusive.
A firmer word on the impact may not emerge until 2014, when
the EPA is expected to release the first exhaustive in-depth
government study on the long-term effects of fracking on
drinking water, commissioned by Congress over two years.
While climate change issues and air pollution may remain
larger agency priorities, fracking is moving up the agenda.
"I don't think they would be capable of ignoring something
that Matt Damon makes a movie about," said Fitzsimmons.
Damon and John Krasinski star in "Promised Land," a new film
that opened on Friday exploring the social impact of fracking.
It received mixed reviews from critics, but is being closely
watched by an energy industry that fears it could further
antagonize public opinion over domestic drilling.
A Gallup poll this year showed drinking water contamination
is the leading environmental concern among Americans.
DIESEL, WASTEWATER AND FLARING
The debate rages over a diverse range of issues.
While fracking was exempted from the Federal Clean Water Act
in 2005, operations that used diesel fuel, which contains a
number of toxic chemical compounds, were not exempted.
However, what exactly constitutes "diesel" has been a bone
of contention among oil firms and environmental groups.
"The question is how to define "diesel" - broadly or
narrowly," says consultant McNally.
"It's a big issue especially for Bakken producers," he said,
referring to the region of North Dakota where crude oil output
has more than tripled in two years.
The EPA published a draft definition in May, which met with
criticism from the industry and some legislators, but it will
fall to the new administrator to set a final definition.
Under Jackson, the EPA also said it would begin to regulate
the millions of gallons a day of wastewater that is withdrawn
from wells after the fracking process, probably in 2014. This is
usually trucked offsite and sometimes re-injected elsewhere,
although increasingly it is being reprocessed for further use.
And eventually, the EPA could face pressure to backtrack on
previous initiatives. In April, the agency relented to pressure
from the industry, giving drillers until January 2015 to end the
practice of "flaring" excess natural gas from wells that were
not connected to pipelines. It had initially proposed that firms
cease almost immediately.
For Jackson's successor, a central question is whether the
EPA takes a broader role in the industry, or, as Jackson hinted
a year ago, allows state officials to call most the shots when
it comes to drilling:
"It's not to say that there isn't a federal role, but you
can't start to talk about a federal role without acknowledging
the very strong state role."