4th Quarter, 2009
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4th Quarter, 2009 |
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Hydraulic Fracturing Exemption at Risk
By Joe Blice, CPA, Audit PartnerA piece of legislation recently proposed by representative Diana DeGette of Colorado aims to remove hydraulic fracturing’s exemption from the Safe Drinking Water Act (SDWA). The bill would amend the SDWA to include the underground injection of fluids or propping agents pursuant to fracturing operations related to oil and gas activities. It also adds to the SDWA a requirement that any person undertaking hydraulic fracturing disclose to the state the chemical constituents used in the process. The bill also explains that the state shall make the disclosure of chemical constituents available to the public, including posting such information on an appropriate website. A practice used for over a half-century to stimulate oil and gas wells, hydraulic fracturing is the often-used technique of injecting fluids or propping agents into a formation to hold the producing fissures open so that hydrocarbons will flow. It helps produce more than seven billion barrels of oil and 600 trillion cubic feet of natural gas per year. Industry supporters say its use is critically important to producing more of the oil and natural gas that our nation will be consuming for decades to come. In a report prepared in 2009 for the American Petroleum Institute by IHS Global Insight, titled “Measuring the Economic and Energy Impacts of Proposals to Regulate Hydraulic Fracturing,” it is projected that in five years, if fracturing were eliminated, there would be a decrease of nearly 79% in wells completed. As a result, the country would experience a 17% reduction in oil production and a 45% reduction in natural gas production by 2014, with declines continuing into the future. As an alternative, the report concludes that if there were a change in fluid options for fracturing operations, there would be a reduction in natural gas production of 4.4 trillion cubic feet (or 22%) and a reduction in crude oil production by 0.4 million barrels per day (8%), while wellhead revenue would decrease by 48 billion dollars. Fracturing has been reviewed and regulated by virtually every oil and gas producing state and some federal agencies for years. The proposed legislation would introduce another set of regulations to the production process. Other articles in this newsletter:
Budget Aims to Repeal Tax Incentives for Oil & Gas Producers Additional Federal Developments Energy Industry Impacts State Economies |
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Joe has twelve years of professional experience and serves as an Audit Partner in the Dallas office of HEIN & ASSOCIATES LLP. He provides a wide range of audit and accounting services for both public and privately held companies in the energy industry. Joe has significant experience with Securities and Exchange Commission disclosure and reporting requirements, and has also assisted with mergers and acquisitions as well as initial and secondary securities offerings. He has consulted with public companies for the implementation of Section 404 of the Sarbanes-Oxley Act (SOX 404) internal control and reporting. Joe also specializes in revenue recognition, share-based payment arrangements, disclosures about oil and gas producing activities, and foreign currency translation.