Results of the midterm elections, which propelled Republicans to control of both the U.S. House and Senate, most likely mean that federal regulation of hydraulic fracking is unlikely in the next two years.
According to a report from Moody’s Investors Service, the GOP’s traditional stand is that states should control fracking regulations. The midterm results will also likely negate bills in the House and Senate that propose defining fracking as a federally regulated activity.
Lack of federal regulation is a plus for E&P companies, Moody’s contends. “The change in political climate means that E&P companies can avoid the consequences of higher costs from federal regulation,” according to the report.
The Independent Petroleum Association of America has stated that one particular proposal for federal regulation could elevate costs by up to $100,000 per new well. However, according to the Moody’s report, the biggest benefit of not having federal regulation will be the time it takes to get a permit approved. Federal regulations, Moody’s said, would likely have slowed the process.
Yet federal regulation, which would likely require producers to disclose chemicals added to fracking fluids, is not the only regulatory barrier confronting the industry. Moody’s points out that local rules have placed additional restrictions on fracking, and that some municipalities have banned the practice.
Courts in Pennsylvania and New York in 2013 and 2014, respectively, upheld the rights of local governments to ban fracking even if state law allows it.
Moody’s suggests that federal regulations would not always translate to bad news for oil and gas companies. “Over the long run, standardized federal regulation could reduce opposition to fracking in areas that currently have curtailed or banned the activity since the regulation would provide a standardized framework to permit fracturing.”
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