[Senate Hearing 112-972]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 112-972

 REVIEW OF RECENT ENVIRONMENTAL PROTECTION AGENCY'S AIR STANDARDS FOR 
   HYDRAULICALLY FRACTURED NATURAL GAS WELLS AND OIL AND NATURAL GAS 
                                STORAGE

=======================================================================

                                HEARING

                               before the

                       SUBCOMMITTEE ON CLEAN AIR 
                           AND NUCLEAR SAFETY

                                 of the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 19, 2012

                               __________

  Printed for the use of the Committee on Environment and Public Works



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





         Available via the World Wide Web: http://www.fdsys.gov

                                   ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

25-056 PDF                     WASHINGTON : 2017 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001
            
         
         
         
         
         
         
         
         
         
         
         
         
         
         
         
               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                      ONE HUNDRED TWELFTH CONGRESS
                             SECOND SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
FRANK R. LAUTENBERG, New Jersey      JOHN BARRASSO, Wyoming
BENJAMIN L. CARDIN, Maryland         JEFF SESSIONS, Alabama
BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico                MIKE JOHANNS, Nebraska
JEFF MERKLEY, Oregon                 JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, New York

                Bettina Poirier, Majority Staff Director
                 Ruth Van Mark, Minority Staff Director
                              ----------                              

              Subcommittee on Clean Air and Nuclear Safety

                  THOMAS R. CARPER, Delaware, Chairman
MAX BAUCUS, Montana                  JOHN BARRASSO, Wyoming
FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         JEFF SESSIONS, Alabama
BERNARD SANDERS, Vermont             LAMAR ALEXANDER, Tennessee
JEFF MERKLEY, Oregon                 MIKE JOHANNS, Nebraska
BARBARA BOXER, California (ex        JAMES M. INHOFE, Oklahoma (ex 
    officio)                             officio)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                            C O N T E N T S

                              ----------                              
                                                                   Page

                             JUNE 19, 2012
                           OPENING STATEMENTS

Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..     1
Barrasso, Hon. John, U.S. Senator from the State of Wyoming......     3
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     4
Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland     7
Gillibrand, Hon. Kirsten, U.S. Senator from the State of New York     9
Udall, Hon. Tom, U.S. Senator from the State of New Mexico.......     9

                               WITNESSES

McCarthy, Hon. Gina, Assistant Administrator, Office of Air and 
  Radiation, U.S. Environmental Protection Agency................    10
    Prepared statement...........................................    13
    Responses to additional questions from Senator Inhofe........    22
Krupp, Fred, President, Environmental Defense Fund...............    48
    Prepared statement...........................................    50
    Responses to additional questions from Senator Inhofe........    65
Corra, John V., Director, Wyoming Department of Environmental 
  Quality........................................................    68
    Prepared statement...........................................    70
    Responses to additional questions from Senator Inhofe........    75
Schuller, Tisha Conoly, President and CEO, Colorado Oil and Gas 
  Association....................................................    78
    Prepared statement...........................................    80
    Responses to additional questions from Senator Inhofe........    88
Smith, Darren, Environmental Manager, Devon Energy Corporation...    90
    Prepared statement...........................................    92
    Responses to additional questions from Senator Inhofe........    96
Allison, William C., V, Director, Air Pollution Control Division, 
  Colorado Department of Public Health and Environment...........   101
    Prepared statement...........................................   103
    Responses to additional questions from Senator Inhofe........   107

 
 REVIEW OF RECENT ENVIRONMENTAL PROTECTION AGENCY'S AIR STANDARDS FOR 
   HYDRAULICALLY FRACTURED NATURAL GAS WELLS AND OIL AND NATURAL GAS 
                                STORAGE

                              ----------                              


                         TUESDAY, JUNE 19, 2012

                               U.S. Senate,
         Committee on Environment and Public Works,
              Subcommittee on Clean Air and Nuclear Safety,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10 a.m. in 
room 406, Dirksen Senate Office Building, Hon. Thomas R. Carper 
(Chairman of the Subcommittee) presiding.
    Present: Senators Carper, Inhofe, Cardin, Merkley, 
Barrasso, Sessions, and Johanns.
    Also present: Senators Udall and Gillibrand.

          OPENING STATEMENT OF HON. THOMAS R. CARPER, 
            U.S. SENATOR FROM THE STATE OF DELAWARE

    Senator Carper. The hearing will come to order.
    We welcome you, one and all. Appreciate the efforts of our 
witnesses to join us today.
    As you know, today's hearing is an oversight hearing. It's 
focused on air rules for the oil and natural gas industry which 
the EPA finalized, I believe, in April. Senators will have 5 
minutes for their opening statements, and I'll then recognize 
the Assistant Administrator for the Office of Air and Radiation 
at EPA to offer her statement to the Committee.
    Following the Assistant Administrator's statement, we will 
have one round of questions. Then our second panel of witnesses 
will come forward, and their testimony will be followed by 
another round of questions.
    Today we hear a lot about the incredible boom in natural 
gas production in this country. Some call it a blessing, and I 
think there is something to that. We hear how this boom has 
allowed us to see extremely low natural gas prices. Low prices 
not only bring our energy costs down, but also help to make our 
manufacturers even more competitive throughout the world.
    The surge of production is mainly due to a technique called 
hydraulic fracturing, or fracking. And as the low hanging fruit 
of easily accessible reservoirs dry up, natural gas producers 
have increasing turned toward fracking to access more 
unconventional shale gas formations.
    Recently the use of fracking has skyrocketed to an 
estimated 11,400 new fractured wells each year. These numbers 
are expected to grow. As the use of fracking increases, we have 
a responsibility to ensure that developments happen responsibly 
and our shared environment remains protected, especially the 
air we breathe. Without control technology, fracking can result 
in the release of natural gas and methane into the atmosphere. 
Beyond wasting a limited energy resource, these emissions can 
damage our air and our health.
    The natural gas emissions contain harmful pollutants that 
form ozone and can also cause cancer. The methane released by 
fracking is a greenhouse gas that is more than 20 times--20 
times--as potent as carbon dioxide.
    Before April of this year, only States like Colorado and 
Wyoming required the capture of these emissions. There were no 
Federal regulations regarding fracking emissions. I was 
encouraged when the Environmental Protection Agency stepped up 
to address the lack of regulation for this growing industry and 
growing source of emissions this April with the release of new 
air standards for oil and gas production. These new standards 
focused on fractured natural gas wells, asking industry to 
clean up their air pollution emissions by 2015.
    Mirrored after State regulations in Wyoming and Colorado, 
these new rules are a common sense, win-win solution for both 
industry and the environment. The rules will significantly 
reduce the amount of smog producing, cancerous air pollutants 
released by fractured wells, primarily through a process known 
as reduced emissions completions, or green completions.
    Green completions use special equipment to capture the 
natural gas that normally escapes into the atmosphere during 
the fracking process. This green completion approach represents 
a victory both for clean air and for industry, because once the 
emissions are captured using the green completion method, the 
gas companies can turn around and sell that natural gas instead 
of letting it escape unused into the atmosphere. The additional 
profits earned by selling this captured gas are expected to 
offset the cost of the new equipment and training that are 
necessary to implement this rule.
    Not only will these standards significantly reduce harmful 
air pollution, the industry may well come out ahead in the end, 
too, a win-win for industry and the environment. That is why 
Colorado and Wyoming and a number of municipalities already 
require green completions, and many operators are using the 
technique voluntarily.
    After reviewing over 150,000 comments, EPA has also 
provided a reasonable schedule for producers to capture their 
excess natural gas through green completions. Producers will 
have until 2015 to fully comply with these new rules. The 
result will be significantly improved air quality for everyone.
    This regulation shows that the choice between clean air and 
a strong economy is a false choice. We can have both clean air 
and a strong energy sector in this economy. And we need both.
    Our shale gas formations have enormous potential and will 
certainly play a key role in America's energy future. But this 
potential must be utilized responsibly. The new EPA air 
standards strike the proper balance between a healthy 
environment and our energy needs.
    On that note, I look forward to having open and thoughtful 
dialogue with our witnesses and colleagues today. I am pleased 
to recognize one of our two Senators from that State of 
Wyoming, Senator Barrasso.

           OPENING STATEMENT OF HON. JOHN BARRASSO, 
             U.S. SENATOR FROM THE STATE OF WYOMING

    Senator Barrasso. Thank you very much, Mr. Chairman.
    I want to also thank and welcome the witnesses here today. 
Especially I want to welcome John Corra, the Director of the 
Wyoming Department of Environmental Quality. John was appointed 
as the Director of the Department by then-Democrat Governor 
Dave Friedenthal and confirmed by the State senate in March 
2003, when I was a member of the Wyoming State Senate. So John, 
thanks so much for coming back from Wyoming for a visit.
    Mr. Chairman, the White House has touted its strong support 
for natural gas as a viable alternative, they say, to cheap, 
affordable American coal. President Obama stated during his 
2012 State of the Union speech that ``We have a supply of 
natural gas that can last America nearly 100 years.'' He said, 
``My Administration will take every possible action to safely 
develop this energy.''
    The rhetoric of this White House does not match the actions 
of this Administration and its allies in the environmental 
community. On May 9th, 2012, a Bloomberg news story highlights 
an important point made by Jack Gerard, President of the 
American Petroleum Institute, and Dave McCurdy, President of 
the American Natural Gas Association. The Bloomberg article 
states that both Gerard and McCurdy have been emphasizing one 
point. While Obama had called for more gas production, as many 
as a dozen Federal agencies--as many as a dozen Federal 
agencies--were considering various rules or policies that could 
deal drilling a setback.
    Among these rules, Mr. Chairman, are proposed EPA rules 
governing hydraulic fracturing. This week we will debate 
whether the Senate will endorse President Obama's war on coal, 
when we vote on Ranking Member Inhofe's amendment to block the 
EPA's Utility MACT rule. This rule makes it nearly impossible 
for energy companies to build new coal fired power plants. The 
war on coal by this Administration has been devastating to 
communities across the West, the Midwest, and Appalachia.
    What we are going to discuss here today is this 
Administration's upcoming war now on natural gas. The war on 
natural gas should be no surprise to those who have followed 
the words of then-Candidate Senator Barack Obama, who 
campaigned against natural gas as part of his cap and trade 
climate change agenda. In a 2008 interview with the San 
Francisco Chronicle, then-Candidate Obama stated that ``Because 
I'm capping greenhouse gases, coal fired power plants, you 
know, natural gas, you name it, whatever the plants were, 
whatever the industry was, they would have to retrofit their 
operations.'' That is Candidate Barack Obama, 2008, against 
natural gas.
    It is important to note that the Sierra Club has once again 
endorsed President Obama for President. On May 3d, the Sierra 
Club announced their ``Beyond Natural Gas'' campaign. In a May 
7th of this year Energy Environment Daily article, the 
Executive Director of the Sierra Club spelled out his 
intentions toward new natural gas plants when he stated, 
``We're going to be preventing new gas plants from being built 
wherever we can.''
    I suspect that many in this Administration agree with this 
goal, while they still tell folks across America that natural 
gas will be there to supply their needs after they are done 
with their war on coal. What I want my colleagues to understand 
is that we cannot simply allow the same tactics that are 
hurting the many working men and women across this country who 
work in the coal industry to have those same tactics used to 
drive natural gas out of business.
    Organizations like the Sierra Club have praised these 
tactics and have celebrated the closing or blocking of hundreds 
of coal plants. These same organizations now fully expect this 
EPA to begin using the same tactics to attack natural gas. They 
are advocating this just as the first shovels are hitting the 
ground to build the natural gas well pads and new natural gas 
plants to replace coal mines and power plants that are being 
forced to close. If we do not change course, the end result 
will be an expensive, rationed, and foreign supplied energy 
future for our country.
    Mr. Chairman, I believe we must make American energy as 
clean as we can as fast as we can, and do it in ways that don't 
raise energy prices for American families or cost thousands of 
jobs. I believe this Administration has been on the wrong track 
to accomplish this goal.
    Thank you, Mr. Chairman. I look forward to the testimony.
    Senator Carper. You are welcome.
    I was sitting here wondering, did we read the same rule? We 
will find out.
    Senator Inhofe.

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you, Mr. Chairman.
    I also want to welcome on the second panel Darren Smith, 
who will have a great story to tell. It is incredible, some of 
the good things that are happening out there.
    But today's hearing is to review the EPA's air rules and 
highlights on ongoing war waged by the Obama administration 
against fossil fuels in the development of America's abundant 
domestic energy resources. Ironically, this hearing comes at a 
time when President Obama's top environmental team is in Rio. 
That is called the Rio Conference Plus 20, the first one was in 
1992. They are down there working on policies that would 
significantly weaken this country and which have failed time 
and time again, not only in the U.S. Congress, but in the arena 
of public opinion as well.
    It is also important to mention that this hearing comes 
while Congress is in the middle of a debate about the Obama 
EPA's economically devastating Utility MACT that was mentioned 
by Senator Barrasso. This was my CRA to try to stop this rule 
that would essentially do away with coal in America.
    The oil and gas production in America is increasing despite 
the Obama administration's best efforts to shut down domestic 
energy production in favor of their radical green agenda. They 
are working to stop hydraulic fracturing through 13 Federal 
agencies and have attempted to implement their agenda to 
``crucify'' American energy producers.
    We got a glimpse of this crucify philosophy in a rare 
moment of honesty by the Sixth District Regional Administrator 
of the EPA. Because of the EPA's unprecedented actions in 
Parker County, Texas, I launched an investigation to begin with 
a letter to the agency on April 25th. I am extremely 
disappointed that despite my attempt to conduct oversight as a 
ranking member of the authorizing committee with jurisdiction 
over the agency, EPA has met my request with a disappointing 
lack of responsiveness and transparency. While I certainly 
don't blame the witness on the first panel, I would like to 
have your help in trying to get a response from this letter.
    Almost 2 months after sending the letter, I have received 
no response from the EPA, let alone the comprehensive and 
substantive answers required to ensure legitimate congressional 
oversight of an agency that is becoming increasingly rogue and 
defiant. Due to the importance of this investigation and the 
EPA's lack of cooperation, I am pleased to announce today that 
I, along with Senators Vitter, Boozman, Coburn, Cornyn, and 
Hutchison, that is every Republican member that is in the 
Region 6, we have a letter sent formally to request that the 
EPA Inspector General launch an official investigation into the 
EPA's actions in Parker County, Texas.
    Hydraulic fracturing has been used more than a million 
times, and it started in my State of Oklahoma, back in 1949, 
was the first time that they used hydraulic fracturing. Since 
that time, it has been very successful. It has been regulated 
in a fine way by the States. While I often disagree with one of 
the persons, a witness that is on the second panel, Fred Krupp, 
in this case I did agree with him when he said that ``Given the 
dysfunction in DC, a State by State approach will be more 
effective.'' I agree with that statement.
    The EPA Administrator admitted in April, ``In no cases have 
we made a definitive determination that the fracking process 
has caused chemicals to enter groundwater.'' So there we have a 
statement that is made by two individuals, the last one by Lisa 
Jackson. I have a great deal of respect for her honesty in 
response to the question that I had asked. And she said there 
is not a case that is out there where they can identify 
groundwater contamination.
    So these rules that we are talking about are somewhat--are 
rules that we have looked at, and we have a concern that we are 
not just killing it as the vote tomorrow at 12:30 on the CRA on 
Utility MACT, not just on coal, but on all fossil fuels. It is 
kind of interesting to me that people who are opposed to fossil 
fuels--and they have the war on fossil fuels--are starting with 
coal. But the war goes on after that.
    My concern is this. We have a country called America, and 
we have to provide energy to run this machine called America. 
And you can't do it without fossil fuels.
    So I look forward to this hearing, and particularly those 
witness who are familiar with the process of hydraulic 
fracturing. I think it should be a very revealing hearing, and 
I appreciate your coming.
    [The prepared statement of Senator Inhofe follows:]

                  Statement of Hon. James M. Inhofe, 
                U.S. Senator from the State of Oklahoma

    Today's hearing to review EPA's air rules highlights the 
ongoing war being waged by the Obama administration against 
fossil fuels and the development of America's abundant domestic 
energy resources. Ironically, this hearing comes at a time when 
President Obama's top environmental team is in Rio working on 
policies that would significantly weaken this country and which 
have failed time and time again--not only in the U.S. Congress 
but in the arena of public opinion as well. It is also 
important to mention that this hearing comes while Congress is 
in the middle of a debate about the Obama EPA's economically 
devastating Utility MACT rule designed to kill coal in America, 
effectively waging open war against an industry which supplies 
our economy with thousands of jobs and affords us cheap and 
reliable domestic energy.
    Oil and gas production in America is increasing despite the 
Obama administration's best efforts to shut down domestic 
energy production in favor of their radical green agenda. They 
are working to stop hydraulic fracturing through 13 Federal 
agencies and have attempted to implement their agenda to 
``crucify'' American energy producers. We got a glimpse of this 
``crucify'' philosophy in a rare moment of honesty from a 
former Obama EPA Regional Administrator, and unfortunately, we 
have seen this approach played out across the country.
    Because of EPA's unprecedented actions in Parker County, 
Texas, I launched an investigation which began with a letter to 
the Agency on April 25. I am extremely disappointed that 
despite my attempt to conduct oversight as the ranking member 
of the authorizing committee with jurisdiction over the Agency, 
EPA has met my request with a disappointing lack of 
responsiveness and transparency. Almost 2 months after sending 
the letter, I have received no response from EPA whatsoever, 
let alone the comprehensive and substantive answers required to 
ensure legitimate congressional oversight of an agency that is 
becoming increasingly rogue and defiant.
    Due to the importance of this investigation and EPA's lack 
of cooperation, I am pleased to announce today that I, along 
with Senators Vitter, Boozman, Coburn, Cornyn, and Hutchison--
that is, every Republican from EPA Region 6--have sent a letter 
formally requesting that the EPA Inspector General launch an 
official investigation into EPA's actions in Parker County, 
Texas.
    Hydraulic fracturing has been used on more than 1 million 
wells since it was first performed over 60 years ago just 
outside of Duncan, Oklahoma. The practice has always been 
safely regulated by the States, and as a matter of fact, in 
February one of our witnesses was quoted in a New York Times 
article discussing who should be responsible for regulating 
hydraulic fracturing. Fred Krupp said, ``Given the dysfunction 
in DC, a State by State approach will be more effective.'' This 
is a statement I very much agree with. Despite ongoing efforts 
by EPA to manufacture a link between hydraulic fracturing and 
groundwater contamination--including an ongoing water study 
which many have raised serious concerns over--EPA Administrator 
Lisa Jackson admitted in April, ``In no cases have we made a 
definitive determination that the fracking process has caused 
chemicals to enter groundwater.''
    The rules we are discussing today are little more than a 
thinly veiled attempt to regulate greenhouse gases from 
hydraulic fracturing and are an obvious attempt to wrest power 
from States' control and instead place it in the hands of the 
Federal Government. They are critically flawed and are 
predicated on faulty and inaccurate data and analysis that 
over-exaggerate emissions--in some estimates more than 1,400 
percent. Additionally, these rules mandate the use of 
technologies that are not readily available and further 
exaggerate emissions through an inadequate accounting of 
production and gathering facilities.
    The combination of hydraulic fracturing with horizontal 
drilling has led to an American energy revitalization that has 
created thousands of American jobs, brought in revenues to 
State, local, and Federal governments, and helped enhance our 
nation's energy security. It has occurred in States that 
effectively and efficiently regulate hydraulic fracturing 
absent unnecessary Federal impediments. Current efforts by the 
Obama administration are designed to eliminate hydraulic 
fracturing by putting more and more authority over the process 
into the hands of the Federal Government. States have 
successfully regulated this practice for over 60 years and are 
in the best position to protect their citizens and understand 
their unique challenges and geologies. For these reasons, we 
should keep the States in charge of hydraulic fracturing and 
continue the benefits to consumers, jobs, economic growth and 
expansion, and our nation's energy security that have resulted 
from the safe and responsible development of America's vast 
resources.
    I would like to thank our witnesses for coming today, 
particularly Darren Smith from Devon Energy, and I look forward 
to hearing the testimony.

    Senator Carper. All right.
    Senator Cardin.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 
            U.S. SENATOR FROM THE STATE OF MARYLAND

    Senator Cardin. Thank you, Mr. Chairman. Thank you very 
much for calling this hearing.
    First, let me just take issue with the comments of Senator 
Inhofe and Senator Barrasso as it relates to the record of the 
Obama administration on energy security. Domestic oil 
production has increased--increased--every year President Obama 
has been in office. In 2011 U.S. crude oil production reached 
its highest level since 2003, increasing by an estimated 
120,000 barrels per day over the 2010 level to 5.6 million 
barrels per day.
    Since 2009 the United States has been the world's leading 
producer of natural gas. In 2011 U.S. natural gas production 
easily eclipsed previous all-time production records set in 
1973. Overall, oil imports have been falling since 2005, and 
net imports as a share of the total consumption declined from 
57 percent in 2008 to 45 percent in 2011, the lowest since 
1995.
    Mr. Chairman, I put that on the record because I think the 
Obama administration has tried to be balanced as we relate to 
energy security. We desperately need an energy policy for this 
country. An energy policy that makes us energy secure, that 
builds jobs that can't be exported. And we know green energy is 
where we will create more jobs. And one that is friendly toward 
our environment. The good news is that the answer for all three 
lies in a similar solution.
    So I just really want to put on the record that the Obama 
administration has been very sensitive to energy security 
issues, as well as dealing with our future for jobs and for our 
environment.
    We have--Marylanders have a direct interest in this 
hearing. The Marcellus Shale deposits run through the western 
part of Maryland, so I am very much interested. And Senator 
Inhofe knows the Subcommittee on Water and Wildlife held a 
similar hearing as it relates to water quality issues. And 
Senator Inhofe has pointed out rather accurately that Oklahoma 
has been doing fracking for a long time, and its record is very 
positive.
    We now know that there are 11,000 new fracking wells that 
have been placed into service in the last year. So there is a 
lot going on. The challenge is that not every geological area 
is the same as Oklahoma.
    Another problem we have is that the pollution issues--
whether they be water or whether they be air--know no State 
boundaries. So if a State is not doing what it needs to do, and 
pollutants enter our air flow, if it happens in West Virginia, 
it is going to come into Maryland.
    So Maryland can have the tightest rules that there are, and 
we have seen that in regard to the utility issues that we will 
be talking about later today on Senator Inhofe's resolution. 
Maryland has taken steps as it relates to our utilities. The 
problem is the rest of the nation has not. And this is a 
national problem. We need national solutions.
    As a result, we passed the Clean Air Act. We also passed 
the Clean Water Act. And the Environmental Protection Agency is 
charged with carrying out the responsibilities under the Clean 
Air Act, and that is exactly what they are doing. In fact, the 
court is directing them to come in with regulations because we 
have an issue.
    The good news is that every time we do these regulations, 
we look at cost-benefits. What is the cost versus the benefits? 
In every case, the ratios are well in favor of the benefits to 
our society by having clean air. I am sorry Senator Lautenberg 
is not here because he tells, I think, a very clear story, a 
personal story about asthma in his family and the impact that 
dirty air has on children and on parents that have to stay home 
and miss work.
    So clean air is an important responsibility. I think we all 
want to make sure that we have clean air. But here is the good 
news. The good news is if we get this done right we can expand 
our natural gas collections in this country in a way that will 
be more cost effective and also reduce pollutants. And that is, 
I think, what the Department is trying to do. One of their 
proposals, as I understand, captures some of the gas that is 
being emitted for sale, providing another revenue flow and more 
energy for this country and helping our environment.
    And that is, I think, what we are trying to find, ways that 
we can get energy from a variety of sources, including natural 
gas, do it in a way that creates more jobs, and is friendlier 
to our environment. And I would hope, in compliance with very 
important laws such as the Clean Air Act, which has helped the 
safety of people in this nation.
    So I look forward to this hearing, and I hope that we can 
stay straight as to the issues that are really before us. Thank 
you.
    Senator Inhofe. Mr. Chairman.
    Senator Carper. Senator Inhofe.
    Senator Inhofe. As my good friend Senator Cardin knows, 
when another member's name is mentioned, he can respond. So I 
want to do that. If you will just briefly.
    Senator Carper. Please.
    Senator Inhofe. It is true that production has expanded 
since 2008 during this Administration. However, it has all been 
done in the private sector. With all the advances that are out 
there right now, and we are booming, it is the answer to our 
energy problem, it is the answer to unemployment, and all of 
that, it is all happening in the private sector. It is 
unbelievable to me that in the public sector, that which the 
Obama administration has control over, it has actually reduced 
by 17 percent.
    So it is booming, and it is booming in spite of his effort 
toward percentage deletion, Section 199, manufacturers' 
exemption and all of the tax things that he has had that would 
be punitive to development of gas and oil.
    Senator Carper. All right. Let's just hold it there.
    Senator Cardin. I do know Senator Inhofe wanted to 
nationalize our energy industry.
    Senator Carper. Let's just hold it there.
    Senator Gillibrand, you are next; thank you.

         OPENING STATEMENT OF HON. KIRSTEN GILLIBRAND, 
            U.S. SENATOR FROM THE STATE OF NEW YORK

    Senator Gillibrand. Thank you, Mr. Chairman, and thank you 
for letting me participate in this hearing, since I am not on 
the Subcommittee. I appreciate your generosity.
    Thank you for being here. I just want to inquire on two 
areas. Now, obviously natural gas drilling in New York State is 
a huge economic opportunity that many of our farmers and rural 
landowners are very interested in pursuing. But many of our 
communities are also concerned about what would happen to 
quality of drinking water, what risks are being taken, are 
there any health effects.
    And the two major questions that I am hoping you can 
respond to are this: many members of our community are 
interested in knowing what the formulas are, what the 
concentrations are, and what chemicals are being used in the 
hydro-fracking process. They believe that it is a fundamental 
right to know what chemicals are being placed into the ground 
and whether those chemicals have had tests concerning health 
effects. Have there been studies? Have there been tests? Do we 
know whether they have any negative health effects? Are there 
any carcinogens preset?
    The second question is, obviously when you engage in hydro-
fracking, when you push the water deep into the earth, you will 
bring up water that has then been tainted with natural elements 
that are found within the earth. Oftentimes that may include 
radium. So the question is, is there a way to clean this water 
from any heavy metals or any other contaminants safely enough 
to have it then reintroduced into the water supply in some way?
    So those are the two areas of concern that New Yorkers have 
come to me most often with. Can we get full disclosure? Is 
there a way to mandate that disclosure so we know that no 
chemicals being used have negative health effects and know in 
advance that studies have already been done? And two, can we 
require treatment of water that comes up to make sure we are 
not contaminating groundwater? And I know that this is just 
opening statements, but I won't be here for later. So when it 
is appropriate, I would be grateful if you either would respond 
to those questions or submit for the record. Those are my two 
areas of interest for New York State.
    Senator Carper. Thanks for joining us today.
    Senator Udall.

             OPENING STATEMENT OF HON. TOM UDALL, 
           U.S. SENATOR FROM THE STATE OF NEW MEXICO

    Senator Udall. Thank you very much, Senator Carper. I also 
appreciate your allowing me to participate.
    I just wanted to note, Senator Inhofe, in the Permian 
Basin, we are booming in terms of oil. This is mostly BLM land, 
and we are at a 12- to 14-year high in terms of oil production 
on Federal lands. Gas isn't nearly as high, as you know, 
because of the economics and the low gas price. But we see 
different things around the country, but I thought that should 
be noted for New Mexico and the Permian Basin flows over into 
Texas and then southeastern New Mexico.
    I believe that natural gas has great potential as an energy 
source in the U.S. It is a significantly cleaner burning fuel 
for power plants and vehicles and coal or oil. And America has 
a very large supply due to shale gas reserves. Like any growing 
resource, extraction sector, the natural gas industry will need 
to minimize its impact on the environment to maximize its 
potential. EPA put a lot of work collaborating with industry, 
developing the standard to reduce fugitive emissions from 
hydraulic fracturing of oil and gas wells.
    I am encouraged by reports that many oil and gas producers 
already meet the proposed standard, since it is in their 
interest to minimize methane emissions.
    I would like to thank our witnesses today. In particular, 
Assistant Administrator Gina McCarthy, Fred Krupp from EDF, and 
Mr. Darren Smith of Devon Energy. Devon has a significant 
presence in New Mexico and contributes a good deal to efforts 
like BLM's Restore New Mexico program to mitigate their 
impacts.
    So with that, Senator Carper, I would yield back.
    Senator Carper. All right, thanks for joining us.
    Let me welcome our first witness, no stranger to this 
Committee, Gina McCarthy. As we know, Ms. McCarthy is the EPA 
Assistant Administrator for the Office of Air and Radiation. I 
think she is doing an exemplary job since joining the EPA. We 
welcome you back here today.
    You will have roughly 5 minutes to present your opening 
statement, and the full content of your statement will be 
included in the record. Again, welcome, thanks for joining us. 
Please proceed.

   STATEMENT OF HON. GINA MCCARTHY, ASSISTANT ADMINISTRATOR, 
  OFFICE OF AIR AND RADIATION, U.S. ENVIRONMENTAL PROTECTION 
                             AGENCY

    Ms. McCarthy. Thank you, Chairman Carper, Ranking Member 
Barrasso, members of the Subcommittee.
    Mr. Chairman, I appreciate the opportunity to appear before 
you today regarding EPA's recently issued emissions standards 
for the oil and gas industry. These standards will 
significantly reduce emissions of harmful air pollutants. They 
are achievable through current technologies already available 
and being used by leading companies as well as States. They 
will not slow natural gas production, and the result will be 
substantial cost savings.
    A year ago, the President set a bold but achievable goal of 
reducing oil imports by a third in a little over a decade. In 
the last year alone, we have already cut net imports of oil by 
10 percent, or a million barrels a day, putting the United 
States on a pace to meet our goal by the end of the decade.
    Domestic oil and natural gas production has increased every 
year President Obama has been in office. In 2011 American oil 
production reached the highest level in nearly a decade, and 
natural gas production reached an all-time high. The Obama 
administration is committed to ensuring the development of 
these vital domestic resources occurs both safely and 
responsibly.
    The rules we are here to discuss today include the first 
Federal air pollution standards for hydraulically fractured 
natural gas wells, along with requirements for several other 
oil and gas emission sources, such as storage tanks and natural 
gas processing facilities that currently are not regulated at 
the Federal level. These standards will reduce ozone forming 
air pollution and cancer causing air toxics, providing health 
benefits for Americans across the country.
    Combined, these rules are expected to reduce between 
190,000 and 290,000 tons of volatile organic compounds and 
emissions reductions of 12,000 to 20,000 tons of air toxics 
each year. Exposure to ozone is linked to increased asthma 
attacks, hospital admissions, and emergency room visits as well 
as premature deaths. EPA's rules also protect against potential 
cancer risks from emissions of several toxic air pollutants, 
including benzene.
    As a co-benefit, the technologies also reduce methane 
emissions. Methane is an ozone precursor, and is a greenhouse 
gas that is more than 20 times as potent as carbon dioxide. 
These standards are expected to reduce methane emissions by the 
equivalent of 19 million to 33 million metric tons of carbon 
dioxide annually.
    EPA worked with the regulated industry, and we worked with 
affected States to develop these new standards. After 
considering extensive public comment, we made changes in the 
final rules to help ensure that pollution reductions are 
achieved without slowing natural gas production. Most 
importantly, the rules include a transition period during which 
industry can control volatile organic compound emissions from 
hydraulic fracturing using one of two approaches. Until January 
2015 VOC emissions can be controlled either through flaring or 
through the use of so-called green completions, or reduced 
emission completions, which capture natural gas that otherwise 
would escape to the air.
    After January 1, 2015, green completions will be required 
for most wells covered by the standards. This will provide the 
time necessary to order and manufacture enough equipment to 
ensure that these green completions can be done cost 
effectively.
    Gas captured through green completions can be treated and 
sold, and the revenues from the sales are expected to more than 
offset the cost of compliance. EPA's analysis shows a cost 
savings of $11 million to $19 million annually when the rules 
are fully implemented in 2015.
    These standards are achievable. Information provided to EPA 
indicates that green completions already are being used at 
about half of the fractured natural gas wells in the United 
States because of the leadership of those in the natural gas 
industry. Green completions already are required by leading 
States like Wyoming and Colorado and by some cities, including 
Fort Worth and South Lake, Texas.
    In crafting these rules, we made a special effort to ensure 
the program aligns with the existing programs in these States. 
We learn from them; we align with them. We do not duplicate 
their effort, but we ensure that there is a level playing field 
across the United States.
    EPA standards support responsible growth in oil and natural 
gas development while protecting public health and the 
environment. They do level the playing field, requiring wells 
across the country to implement what is cost effective in 
proving technologies that are already used by the leading 
companies.
    Finally, EPA standards will save millions of dollars 
annually by encouraging recovery of natural gas that currently 
is wasted. To sum up, these are win-win standards that 
represent an important addition to the more than 40-year 
success story of the Clean Air Act.
    Thank you very much, and I look forward to responding to 
your questions.
    [The prepared statement of Ms. McCarthy follows:]
    
    
    
  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
  
   
    Senator Carper. Thank you.
    We have been joined by Senator Johanns, recovering from his 
birthday yesterday, looking none the worse for wear. Nice to 
see you.
    I was born in West Virginia. They mine a lot of coal there 
in my native State. While we are not using as much coal today 
for generating electricity as we were a decade ago or even 5 
years ago, we are going to be using coal for a long time in 
this country. Fortunately, we will be able to use a lot of 
natural gas in this country. We are already the Saudi Arabia of 
coal. We have become the Saudi Arabia of natural gas.
    And I understand that we are well on our way to becoming a 
net exporter of oil. That is not a bad success story. And we 
shouldn't stop there. There is more that we can do.
    I think what EPA is trying to do is to say, as we make 
progress on those fronts, let's just make sure that we are 
being smart with respect to the emissions that come from the 
fracturing or the fracking process.
    Senator Johanns and I are recovering Governors, and served 
together for a while in the National Governors Association. I 
used to say when I was Chairman there that the States are 
laboratories of democracy. And rather than us at the Federal 
level reinventing the wheel every time, why don't we look to 
the other 50 States and see if we can learn some lessons from 
them.
    Why have we picked Wyoming and Colorado for those lessons, 
and what are those lessons that we can implement today?
    Ms. McCarthy. Colorado and Wyoming really have gone out in 
front on these issues, recognizing that there are opportunities 
for their States to actually accrue revenues and to preserve 
the natural resources of this country by using this process 
called green completions. What we attempted to do in looking at 
applying those to the national level was to coordinate with 
them as much as possible as well as with the industry to ensure 
that we understood the technologies that are available that we 
did what the law required, which is to make sure that those 
technologies would be out in commerce and be effective in 
producing these cost effective reductions.
    For that reason, we made quite a bit of adjustment between 
the proposal and the final rule, on the basis of all the 
comments we received from those States and from the industry 
itself as well as the environmental community and other 
stakeholders.
    Senator Carper. OK, thanks.
    It is my understanding that EPA has made some changes from 
the proposal, the original proposal to the final new source 
performance standards for the fractured natural gas wells. 
Could you take a minute or two and just discuss or describe 
some of those changes that you have made?
    Ms. McCarthy. Yes. Senator, we made a number of changes 
that increased compliance flexibility for well owners that 
streamlined notification, reporting, that eliminates 
unnecessary expenditures at the State level and ensures 
coordination with States like Wyoming and Colorado. Primarily, 
we did this phase-in process for green completions to allow 
until January 2015 to move toward green completions. In the 
meantime, you can either do green completions or flaring. That 
was in direct response for the industry concern that the 
equipment may not be readily available.
    Now, the second big thing we did was we recognized that 
there are formations in the U.S. where hydro-fracking is 
actually happening where there is a low pressure issue which 
precludes that from being cost effectively captured. And we 
created a subcategory that recognized that and understood that 
in areas, that in certain area formations, we wouldn't be 
needing to look at green completions where they weren't cost 
effective, and able to technology-wise be achieved.
    We also identified lots of ways in which we could 
streamline the reporting, including recognizing that if you are 
already pre-notifying to States, you don't have to do the same 
thing to the Federal Government. We also took a look at 
removing some requirements for some of the more downstream 
transmission areas where the VOC content wasn't as high in 
response to comments. So we made a number of changes here that 
directly respond to industry concerns and that ensure that we 
can provide these reductions cost effectively.
    Senator Carper. OK, thanks.
    I think in our second panel today some of the witnesses may 
claim that EPA has overestimated emissions from hydraulically 
fractured natural gas wells. What do you have to say in 
response to those assertions?
    Ms. McCarthy. EPA is confident that our emissions estimates 
for gas well completions are reasonable, that they don't 
overestimate the total emissions, and they are based on the 
best data currently available. We will continue, however, to 
work with stakeholders to ensure that we understand their 
concerns and that the misconceptions that we are hearing do not 
continue.
    I think the interesting thing about this, Senator, is we 
are not really arguing about the standards or the availability 
of the technology. What we are really talking about is how good 
is this rule. Is it good, or really good? Now, that is an 
argument that I can embrace.
    You will hear things like EPA only had four data points. We 
had four studies, a thousand wells engaged. You will hear 
issues about whether we overestimated our emissions factor. 
Does it take a really long time to do a completion? Does it 
take a short time? Well, no matter how much time, we have one 
emission factor. We don't talk about enhancing that for longer 
periods of time. It is one average that is based on formations 
across the country and a wealth of data.
    So we can work through those issues. You will hear some 
confusion, however, but we will work through those, because we 
have leaders in the industry here testifying that we want to 
make sure is appreciative of this rule.
    Senator Carper. All right, thank you.
    One last question, and I will yield to Senator Barrasso. 
Some critics claim that EPA's cost benefit analysis numbers are 
off base. Could you just briefly explain how you came to those 
numbers, and could you address those criticisms?
    Ms. McCarthy. Yes, there was, this is one area where again 
we made significant changes between the proposal and final on 
the basis of comments that we received. EPA takes a look at 
what activities are happening out in the field, what the 
equipment level is that people are using, and we do an estimate 
of what the emission inventory is, if you will, across the 
country.
    But then we reduce that by what is being voluntarily 
reduced. Because there are some great leaders in this industry. 
And we know that half the well completions where there is 
hydraulic fracturing are using green completions now. And we 
take a look at areas where green completions aren't effective, 
and we make those adjustments, and we understand where States 
are already regulating, and we don't want to double count that.
    Then we come out with information on what the costs are on 
the basis of what those emissions are and what the costs are in 
order for capital and for the installation of that equipment. I 
think we did a good job. We understood that there is a balance 
here. We looked at the cost, but we also looked at the money 
that you make when you actually collect the methane. And in the 
end, we are talking about a rule that saves millions of 
dollars.
    Senator Carper. All right, thanks.
    Senator Barrasso, you are recognized for 7 minutes.
    Senator Barrasso. Thank you very much, Mr. Chairman. I 
appreciate it.
    I would assume that you would agree with President Obama 
that we need an all out, all of the above energy strategy?
    Ms. McCarthy. I would.
    Senator Barrasso. So I talked about in my opening 
statement, earlier this year the Director of the Sierra Club 
said about new natural gas plants. He said as we push to retire 
coke plants, he said we are going to work to make sure we are 
not simultaneously switching to natural gas infrastructure, and 
we are going to be preventing new gas plants from being built 
wherever we can.
    What does the EPA plan to do to fight back against that 
approach, to make sure that all these plants and everything are 
able to continue to be developed?
    Ms. McCarthy. Senator, the rules that EPA has been 
finalizing as well as those that are being proposed are not 
about a specific fuel supply. They are about needed reductions 
in pollution and the public benefits that accrue.
    Senator Barrasso. So when an organization, an extreme 
environmental group, they are bragging that they have closed 
coal fired power plants, using the courts, manipulating 
environmental laws, now they want to move on to natural gas 
using the exact same tactics. If you are for natural gas 
development, do you think that we have to change something in 
the law then, to prevent these groups from blocking 
construction and development of natural gas?
    Ms. McCarthy. I think the Administrator and the 
Administration has been very clear that natural gas is part of 
the mix moving forward, that it offers a clean energy supply. 
And we are doing everything we can, like we did in this rule, 
to ensure that it recognizes that, it does not slow the 
development of oil and natural gas, and that we find a way to 
achieve reductions cost effectively.
    Senator Barrasso. Well, the Utility MACT vote is set to 
occur this week. I want to ask you about the EPA's policy in 
regard to this. The EPA Region 1 Administrator, Curtis 
Spalding, was talking to a group of students about Utility 
MACT, about EPA regulations.
    And he went on about the regulations, saying that gas 
plants are the preferred standard, which means if you want to 
build a coal plant, he said, you have a big problem. He said it 
was a huge decision, one made by Lisa Jackson. He said, you 
can't imagine how tough the decision was, referring to Utility 
MACT, because you have to remember if you go to West Virginia, 
Pennsylvania, and all those places, you have coal communities 
who depend on coal.
    We are talking about communities with families, men and 
women working in the industry. There are additional businesses 
in those communities, schools, people who teach the kids. So he 
goes and he says, to say that we just think those communities 
should just go away, we can't do that. But she, meaning Lisa 
Jackson, had to do what the law and policy suggested. He said 
it is painful, it is painful every step of the way.
    So my question to you is, what is going to happen to these 
communities in the West and the Midwest and Appalachia? Where 
do they go when they ``go away''? What is going to happen to 
them? What is going to happen to the jobs, what is going to 
happen to the communities? What is going to happen those people 
and their families?
    Ms. McCarthy. Senator, I did watch the video of Regional 
Administrator Spalding. I think, in my opinion it is fear that 
he was speaking about the challenges associated with coal 
today. And it is lack of competitiveness against natural gas, 
with low gas prices and with steady and low demand, that there 
are challenges associated with coal being competitive. Not 
necessarily just with the rules that are being initiated, 
although they are one factor. It really is a market issue. And 
I think he was trying to speak to the challenge associated with 
working with communities when you have job shifting that 
happens as a result of these market shifts.
    Senator Barrasso. And the regulations that are coming out 
of your organization and the Administration relating to those 
jobs and those communities which will have higher unemployment. 
And we talk about the cause of benefit analysis, I think that 
you underestimate the cost, you overestimate the benefits and 
that the cost to these communities of people being out of work 
is very high in terms of there is not really any future saved 
health care cost, any great degree, compared to the amount of 
additional cost by people in chronic unemployment with 
increased illness, increased hospitalization, premature death, 
a whole host of components that affect the community.
    You started your testimony, you said that the domestic oil 
and natural gas production has increased every year since the 
President has been in office. Most of that development, as 
Senator Inhofe has said, has been on private land, not public 
land. And the Administration is responsible for public land, 
not the private land.
    If those oil and gas operations had been on public land, 
would they be operational today, do you believe?
    Ms. McCarthy. Senator, I don't want to make predictions 
about anything. I do know that there has been a concerted 
effort to work with DOI and other agencies and pull them 
together on the administrative level to ensure that we are 
fully taking advantage of the natural gas resources.
    Senator Barrasso. EPA has indicated that it expects all 
future fossil fueled power plants to use natural gas rather 
than coal. Now, the EPA has issued a proposal to tighten the 
particulate matter standards, create non-attainment areas in 
the various States where the natural gas is being produced, 
will be produced. How will we be able to tap the gas, fuel our 
electricity, create jobs if the EPA proceeds with its proposal 
to create more non-attainment areas? It seems like you are just 
playing right along with the Sierra Club and their efforts to 
go to what they describe as beyond gas, and eliminate gas as 
the next target in the efforts of this Administration.
    Ms. McCarthy. Senator, the rules that we have put out in 
the analysis indicates that coal now is a large portion of the 
energy supply in this country and that it will remain almost at 
the same level. So we are looking at a future where coal 
remains very much a part of the energy supply for this country. 
That is with the rules; that is without the rules. And we are 
using a wealth of data to show that.
    It also shows that those rules increased jobs, not 
decreased them. Although we recognize that there are shifts in 
jobs, and we have to work with communities all along the way. 
So I am not seeing that any of our rules are actually working 
against the way in which the market is already driving this 
industry.
    The most recent particulate matter announcement was a 
proposal. When you looked at that, the levels that we were 
talking about, that we need to scientifically decide what 
levels of protection are necessary in terms of the level of 
pollution that people breathe across this country, those levels 
will be readily achievable for all but six counties on the 
basis of already enacted Federal rules.
    Senator Barrasso. Mr. Chairman, my time is expired. I would 
like to submit additional questions in writing.
    Senator Carper. That will be quite all right.
    Senator Barrasso. Thank you.
    Senator Carper. You bet.
    Senator Inhofe.
    Senator Inhofe. Thank you, Mr. Chairman.
    Let me just say it one more time, because I think it has 
been repeated by Senator Barrasso, but I think it is important, 
because it is a point that kind of floats by, and nobody seems 
to understand it.
    And that is, with all of the good things that are happening 
right now, the Marcellus chain, and all these things that are 
happening, not just in the West, but in Pennsylvania and New 
York, and all the opportunities that are out there, and this 
massive explosion that we are in the middle of right now in 
terms of the production, that the increase that we keep talking 
about, or that the Obama administration keeps talking about, is 
all in the private sector. And if you look at his budgets, 
since he has now had four budgets, and in his last budget, No. 
1, he had percentage depletion, he had Section 199 
manufacturers exemption that he was going to single out the oil 
and gas industry to do away with, the IDCs, that is an 
intangible drilling cost, all these things are punitive to the 
oil and gas industry.
    The fact is that in spite of all these wonderful things 
that are going on, it is all happening in the private sector. 
And in spite of that, the public sector, the public lands, and 
I wonder if my friend from New Mexico has stepped out, but just 
stop and think about the number of jobs, if we were able to do 
the same thing on the public lands. Instead of that, we have 
had a 16 percent reduction. In spite of all this boom that is 
going on in the public sector. It bears repeating over and over 
again.
    I would say for Administrator McCarthy, President Obama 
frequently touts about the job creation potential in the 
natural gas industry and has said many times we have the supply 
of natural gas that can last America nearly 100 years. That is 
true, I have been using 90 years gas and 60 years oil. That is 
if we would get the politicians out of the way so that we could 
explore our own resources here. And I might add, we are the 
only country in the world that doesn't exploit its own 
resources.
    In your testimony, you mentioned that gas plays a key role 
in the nation's clean energy future. My question is simply, 
does this Administration believe that natural gas is a long-
term part or just a bridge in terms of its filling this 
function?
    Ms. McCarthy. Senator, I can only speak to what I know to 
be the case, which is that right now there is a change in the 
energy supply where natural gas is becoming more and more the 
fuel of choice that is driven by the market. I expect that that 
will continue. It doesn't mean that coal is being driven out of 
the system in any appreciable way. That will continue as well.
    And how long that continues, I don't know. But there is an 
overall impetus to move to cleaner and cleaner supplies, and 
then to also bring renewable energy into the mix. But natural 
gas is likely to be here for quite some time.
    Senator Inhofe. Well, I am sure it is, with the 
opportunities that are out there right now. It is just that we 
need to do that on public land as well as private land.
    I would only say this, this is a quote that I don't think 
has been made yet by President Obama. He said, ``So if somebody 
wants to build a coal powered plant, they can. It is just that 
it will bankrupt them.'' To me, that doesn't sound he is very 
supportive of continuing to use that. But I want to have time 
to get my second question in.
    This year, documents came to light revealing a dispute 
during the interagency review of the Utility MACT rule between 
the EPA and FERC. These documents revealed a startling pre-
determination by EPA that natural gas cannot be relied upon for 
a viable fuel switch alternative due to the agency's concern 
over the ``environmental impacts of hydraulic fracturing.'' 
Recently, the EPA Administrator in District 6--and this has 
already been referred to, but I want to get the exact quotes 
down here, then ask you the question. He resigned after 
publicly stating that EPA's ``general philosophy was to crucify 
and make examples of the oil and gas companies.''
    The EPA Region 1 Administrator, Curt Spalding, which was 
quoted by Senator Barrasso, was quoted as saying, this is an 
exact quote, ``Lisa Jackson has put forth a very powerful 
message to the country that if you want to build a coal plant, 
you've got a big problem.'' He went on to explain that the 
decision was painful, which we have already talked about. West 
Virginia, Pennsylvania, and all those places you have coal 
communities who depend on coal and to say that we just think 
those communities will just go away, we can't do that.
    Well, all these statements which have been made by some of 
the most influential people within the EPA, were made at the 
same time the President has been touting the all of the above 
energy approach. My question to you is this. After these 
statements were made, we had some disclaimers coming from the 
EPA, saying those are perhaps just some rogue statements that 
were made out there some place and are not really the 
philosophy of the EPA.
    So the question would be, is it possible that your 
colleagues at the EPA are actually telling the truth about your 
radical agenda, or is it that all of these bureaucrats are 
simply mis-speaking this frequently? Which of the two?
    Ms. McCarthy. So let me take your questions in order. The 
first, you were talking about the FERC and EPA and potential 
differences of opinion relative to MATS. I just want to confirm 
that EPA, FERC, and DOE are working closely on the Mercury and 
Air Toxics Standard in terms of its implementation. We have 
been working together to look at what technologies are 
available, any potential impact on reliability. So I do not see 
any difference in terms of that.
    Senator Inhofe. No, that wasn't the question. The question 
was, these statements that were made, the statements that I 
just now made, quoting the Region 6, Region 1, and some of the 
others who have made about the oil and gas industry, is that 
just them or is that--would you in your position refute that as 
a policy of the EPA?
    Ms. McCarthy. Yes, let me hit that issue head-on. I just 
thought it was a little bit different. I know that Al 
Armendariz, the Region 6 Administrator, used unfortunate words 
that were inflammatory. He says that, the Administrator 
indicated that. They do not give a clear picture of EPA and its 
enforcement policies. I think Al resigned, and that is a clear 
indication that he recognized that his words were unfortunate 
and that they didn't properly represent the agency, and they do 
not.
    I think I explained Curt Spalding and the fact that he was 
perhaps, the quotes that were pulled out, if you looked in 
larger context you might see that Curt is a dedicated 
individual who is actually concerned about coal shifts and 
recognizes the current challenges that coal faces. But EPA is 
not in a position, nor would we ever speak to fuel diversity 
issues beyond ensuring that our rule are achievable and cost 
effective. And the MATS rule in and of itself is already 
achieved by dozens of units of coal right now. And I assure you 
that those decisions that are being made by industry, we will 
work with them to ensure that they can achieve these standards 
within the time that is allocated under the Mercury and Air 
Toxics Standard, if they choose to invest in those older, 
smaller generation units.
    Senator Inhofe. OK, my time has expired. I do have some 
questions for the record relative to your last statements 
there. Because when you say you are for all of the above, and 
of course, not you, the President, the Administration, and part 
of that is the natural gas, and yet you do what you can to kill 
the process of hydraulic fracturing, I have said several times, 
you can't get one cubic foot of natural gas out of a tight 
formation without using this process that has been safe since 
1949.
    Thank you, Mr. Chairman.
    Senator Carper. You are welcome.
    All right, Senator Cardin.
    Senator Cardin. Thank you, Mr. Chairman.
    As I indicated in my opening statement, Maryland is very 
much interested in natural gas. We have the Marcellus Shale 
deposits. I think it is very interesting, as I listen to my 
colleagues complain about Federal action and so many cases 
here, it has been States that have been acting, certainly as it 
relates to water quality, where the Federal Government has a 
limited jurisdiction that the States have been the primary 
player.
    I know that the gas and oil industries have been concerned 
about the inconsistent regulatory climate in the 50 States. I 
think it is in the interest of an energy policy that we have 
national predictability on fracking and on getting natural gas, 
that as I pointed out, the pollutants that go into the air or 
go into our water; the risk factors are not bound by any State 
border. These are national issues, and we need national 
policies to deal with it. On air, we have a little bit clearer 
direction from the point of view of the Clean Air Act than we 
do with the Clean Water Act.
    I want to, though, first respond to Senator Inhofe's point 
on a debate we will have a little later this afternoon with the 
mercury standards. I need to point out that this is a serious 
issue of public health for our community. Maryland thought it 
was so serious that we acted. We passed mercury standards that 
will comply with the standards that have been proposed by EPA. 
We have done that in a way that actually created more jobs in 
our State.
    Our utilities worked with us, helped pass the Healthy Start 
law in our State; improvements have been made in our coal 
burning power plants. And we are meeting those mercury 
standards, as I think the Chairman of the Committee is well 
aware. We have done that in a way that has created jobs, and we 
are proud of that record.
    The problem is that Maryland, like Delaware, Mr. Chairman, 
is downwind. So we can do everything we can to stop the 
pollutants from entering the air as a result of energy 
generation in our own State. But because of surrounding States, 
our citizens are still suffering from the effects of the 
pollutants going into the air. We have our days where it is not 
safe for children to literally go out because of aggravated 
breathing problems.
    The numbers that we have on the MAT standards would save 
thousands of premature deaths, thousands of cases of chronic 
bronchitis, the lost days from work for people who miss work as 
a result of poor air quality, estimated to be 850,000 days. The 
list goes on and on and on. The reason is that air pollution 
leads to cancer, leads to neurological development problems and 
reproductive problems.
    So I guess my question to our witness is, has EPA evaluated 
the cost-benefit of these regulations from the point of view of 
the benefit to our community versus the additional burdens that 
will be placed on compliance with the proposed regulations?
    Ms. McCarthy. We have, Senator, and you are quite right, 
that power plants emit hundreds of thousands of tons of toxic 
air pollutants, and they are related to serious health 
consequences, particularly for children. If you look at the 
bottom line for the mercury and air toxics standard, we are 
talking about public health benefits between $37 billion to $90 
billion each year. And that is a return of $3 to $9 for every 
dollar that we would invest to achieve those reductions through 
currently existing, cost effective technologies.
    Senator Cardin. It is my understanding that those cost-
benefit requirements were as a result of congressional action 
that you need to do those types of analyses. I think 
particularly those on the Republican side insist upon it. And 
we thought it was a good idea to be able to do that. And the 
numbers you are using I think are conservative numbers. There 
is a big range, but the minimum is three to one, which I think 
any economist would tell us is well worth it.
    There is also a human cost here. If it is your child that 
is suffering from asthma, and can't go to camp because of the 
warnings that are being given, and then you have to stay home 
from work, so your child is missing camp, and you are missing a 
day's pay as a result of poor air quality, it really hits home.
    Ms. McCarthy. These are very conservative numbers on the 
benefit side, because we have a lot of difficulty calculating 
with the certainty we need the benefits associated with toxics 
reductions. So these are conservative, but they are real, and 
we are talking about real lives.
    Senator Cardin. I just want to point out, Mr. Chairman, to 
achieve the numbers that the EPA is proposing, just take a look 
at the work that was done in Maryland. Take a look at the 
investments that were made. The technology is there. This is 
not technology that we don't have. We have the technology to 
achieve these results. It was done in a manner that was not at 
all disruptive to the utilities and the costs in our own State.
    I think what we are trying to do is use best practices to 
reach achievable levels in an orderly way, consistent with the 
Clean Air Act, consistent with laws that have been passed 
historically on a bipartisan basis by the Congress in order to 
protect the public health and to do it in a way that that will 
cause little disruption to our production of energy or to the 
economic consequences, in fact, will help our nation grow.
    Thank you, Mr. Chairman.
    Senator Carper. You are welcome, and we thank you.
    Senator Johanns, and Senator Merkley, you are on deck.
    Senator Johanns. Mr. Chairman, thank you.
    Administrator, thank you for being here. Let me if I might 
just offer a thought to start out with. I come from a State, as 
you know, in the center of the country, the State of Nebraska. 
As our State was developing, we chose an avenue of public 
power. We are the only State in the United States that would be 
100 percent public power. One might look at that and say, my 
goodness, that is quite unusual for a State that is 
conservative, substantially Republican. But it is a model that 
worked well for us.
    Over time, as we developed the resources that would 
generate that power, we invested in hydro. Not a lot, but some, 
with Kingsley Dam. We invested in nuclear power, we have a 
couple of power plants out there that are nuclear power, 
generate electricity from that. And we invested in coal. Not 
because of any profit motive or anything like that. Again, I 
ask you to keep in mind that we are a public power State.
    Coal was a pretty good decision for our State. Why? Wyoming 
is right next door. We have railroads that run through our 
State that can easily transfer coal from Wyoming into the State 
of Nebraska, and it has worked very, very well.
    Our public power utilities have always wanted to maintain a 
high standard. They complied with the laws that were there 
through the years. Those laws have changed; we understand that. 
We understand that they will change in the future.
    But let me show you why, or point out something that makes 
us believe that EPA could not be more unreasonable. As you 
know, as the standards were being developed, currently the 
regulations, Nebraska was not a part of the original mix. Then 
all of a sudden, literally at the end, Nebraska was thrown into 
the mix. But what made it even more difficult for our State was 
that we were told that we had to start complying with those 
regulations within about 6, 8 months.
    Now, if you think about that, you can't escape the 
conclusion that that is outrageously unreasonable. Darn near 
arbitrary and capricious, if it is not. Where is that public 
utility going to raise the funds necessary to do the rebuilding 
of that plant that it would need to do? How quickly can they go 
into the financial markets to accomplish that? How quickly can 
they do the design for the plant? How quickly can they hire the 
contractors?
    And it just goes on and on and on. What we are ending up 
with is that we have a situation where it is not humanly 
possible to comply. So let me predict the future. I think 
unless we can get some relief here we just simply close down. 
We just simply can't operate those plants. Notwithstanding our 
good faith and trying to comply with what EPA wants, we have a 
situation where literally it won't be possible to comply. So 
then we have to go into the marketplace and buy the energy that 
people need, going to be a tight market, prices are going to go 
up. And it looks to me, in our State, that we will fulfill the 
President's promise that electricity rates will necessarily 
skyrocket under his plan.
    So Administrator, explain to me why this would be a 
reasonable approach by EPA, and how could you let that happen 
to a State? Does it make any sense to you whatsoever?
    Ms. McCarthy. Senator, let me explain my understanding of 
what you are referring to. And it is the Cross-State Air 
Pollution Rule, which was really replacing the Clean Air 
Interstate Rule that was adopted in the prior Administration 
and found not to be legally solid. The courts remanded it back 
to us, and we had to re-do that rule and do it in a more 
legally and scientifically robust way, which we did.
    The reason why we felt that it was appropriate and in fact 
advisable legally and for public health reasons to aggressively 
look for continued reductions was because this program didn't 
start when the Cross-State Air Pollution Rule was put into 
place. It started when the Clean Air Interstate Rule was put 
into place. That prompted installation of equipment that we 
were able to take advantage of.
    The actual reductions we were looking for in that short 
period of time were not based on need for technology 
installation. They were based on what we believed to be 
documented, readily achievable reductions that you could get by 
dispatching the units differently, looking at some fuel 
switching. There are a variety of things that you do quickly 
and efficiently and effectively, as well as the purchase of 
allowance. This is not a unit by unit compliance. It is a 
trading program where allowances could be generated in other 
areas and purchased, again cost effectively, to achieve the 
reductions that downwind States are looking for to protect 
their public health.
    So I am more than happy to work with your State more 
directly if they feel like we haven't done that. But there is 
also an opportunity in this rule for States to take over the 
allocation of their budgets and do it in a way that they feel 
is more appropriate to them.
    So we are doing everything we can to work with States and 
make sure that this isn't unreasonable, but it also provides 
the downwind States the relief that they Clean Air Act really 
entitled them to and has not yet been delivered.
    Senator Johanns. I appreciate your offer, and there is not 
enough time, in fact I have run out of time already, to 
challenge some of your assertions. But having said that, your 
offer is a good one. I would be more than willing to coordinate 
a meeting with our public power participants to sit down with 
you personally. Because I think you will find out that the 
difficulty that this has created for a State like ours is 
nearly insurmountable. And it is not as easy as you have 
described.
    Now, I don't know what your staff is advising you, but we 
think we have a serious problem. So I will just wrap up by 
saying thanks for your offer; you will hear from us.
    Ms. McCarthy. It is a date.
    Senator Carper. We sound like matchmakers here. That is 
very good.
    I would just say, when you and I were serving as Governors 
together, we found ourselves in my State in a position where we 
could literally have shut down the State, shut down the State 
in order to try to comply with Clean Air requirements and still 
not have been in compliance. And it was because of all the 
pollution that blew in from the upwind States. We felt that 
wasn't fair, and ultimately the court said that as well.
    All right, Senator Merkley.
    Senator Merkley. Thank you, Mr. Chair, and thank you for 
your testimony, Administrator McCarthy.
    Just to kind of track the topic of today's discussion, that 
is setting standards primarily for the recovery of methane that 
comes from flowback, or the fluids that are pumped out of 
fracked wells, as I understand it, you are really presenting a 
win-win. That is, that the fluids, when they are drawn back out 
of the well, release a lot of methane and other substances, but 
primarily methane. That capturing these gases has huge benefit 
for the air, but also is source of revenue to companies. Some 
companies have chosen to voluntarily implement, if you will, 
this recapture or green completion strategy.
    I thought I would just ask you to speak to why have some 
companies jumped in and voluntarily done this. Is it the 
economics of recovery, that they are making money in doing 
this?
    Ms. McCarthy. Our estimate at this point is that about half 
the completions now that are done are green completions. I 
think that a lot of the industries recognize that there is 
significant cost savings. And like any industry, there are 
leaders here. Devon is one of them, where they have gone above 
and beyond. We have a program called Natural Gas Star that 
actually has been working with the leaders to ensure that they 
learn from one another's experience and that we encourage to 
the extent we can this kind of really corporate responsibility.
    But we believe that there needs to be an opportunity for 
that to be nationally shared, that it is appropriate to level 
the playing field, and it is appropriate to reduce emissions 
whenever it is cost effective, never mind beneficial to do so.
    Senator Merkley. So in terms of the experience of the 
companies that have already gone down this track, would they 
come to this now from the viewpoint of, we did this for 
corporate responsibility, or would they also say that it has 
turned out that the value of the gas that is captured actually 
pays for the expenses?
    Ms. McCarthy. There has been tremendous documentation by 
the companies themselves about how cost beneficial it is for 
those companies.
    Senator Merkley. Well, then, let me turn to the fact that a 
couple of States have already adopted green completion 
strategies. I believe Wyoming and Colorado are two of them. Are 
they the only two that have done so?
    Ms. McCarthy. They have. There have been a couple of other 
local communities in Texas, in particular, that have already 
adopted green completions as a requirement.
    Senator Merkley. Cities or counties within Texas?
    Ms. McCarthy. They are, let's see, Fort Worth, which is not 
small, and South Lake, Texas.
    Senator Merkley. And there is actual gas production within 
the city boundaries that is affected by those?
    Ms. McCarthy. I believe it is the county, but I could be 
wrong.
    Senator Merkley. So what has their experience been? Have 
citizens been appreciative of the results or has the initial, 
if you view these kind of as pilot projects for others to 
observe, what lessons have been learned from that?
    Ms. McCarthy. I think in those areas there is significant 
ozone challenges. I think it lowers the volatile organic 
compounds, which is one of the contributors to the formation of 
ozone. So from an air quality perspective, it has been 
beneficial. I think I would encourage you to ask the next 
panel, the State representatives, about the resources that it 
provides to the State when you recover these types of natural 
resources.
    Senator Merkley. So in the cases of Colorado and Wyoming, 
was that State statute that implemented the green recovery, or 
was it a kind of Department of Environmental Quality mandate?
    Ms. McCarthy. I would ask you to ask that question of 
those. I don't want to presume if they were State regulations.
    Senator Merkley. Have they been in place long enough for 
the States to provide feedback, though?
    Ms. McCarthy. Oh, they have, and we worked very closely 
with those States to understand where it was beneficial. We 
also recognize that not all formations across the U.S. are the 
same. So in our rule we recognize that there are low pressure 
like coal bed methane deposits and formations where the 
pressure is not as high and where green completions are not 
going to be available.
    So we did our best to understand why they are beneficial, 
how much they are beneficial, and then areas where their 
benefit may not be available and where technologically we 
wouldn't want to go to the extent of requiring green 
completions, because they are not technically available.
    Senator Merkley. And you also have two phases here, the 
first phase allows flaring, which is a convenient, cheap issue. 
I think it is 2 and a half years before you would require green 
completion, so a 2 and a half year phase-in. What defined that 
time period; why not a longer time period or a shorter time 
period? What was magic about this?
    Ms. McCarthy. It actually was data that the industry 
themselves submitted to us where we could understand how much 
equipment was available and how long it would take for 
equipment to be manufactured and made available so that we 
could move toward green completions in January 2015. I think we 
tried to use the data, we assessed it, we were very comfortable 
with it. We realized that the end goal is to recover the VOCs 
and to stop those from being emitted in the best way possible. 
Flaring helps. It destroys the VOCs, but it also can emit a 
small amount of NOx, which is also an ozone 
precursor.
    So to the extent that we can move from flaring to green 
completions, we are as technologically available and where it 
is cost effective. That is really how our rules drive our 
rulemaking. I think we were very faithful to that and to the 
data we had available to us to make these smart decisions.
    Senator Merkley. Switching gears a little bit, in 2003 
there was a voluntary agreement with a few companies related to 
the use of diesel, I believe, in the fracking fluids. Why was 
diesel used in the fracking fluids, and why was it important to 
get it out?
    Ms. McCarthy. Senator, I am more than happy to go back and 
provide you some written follow up on that. I do not have the 
familiarity with that subject matter to be able to give you a 
direct response.
    Senator Merkley. Great. Thank you very much.
    Thank you, Mr. Chair.
    Senator Carper. Ms. McCarthy, I think that wraps it up with 
you. You are a good warm-up act for these other guys.
    Ms. McCarthy. They will hold their own. Thank you, Senator.
    Senator Carper. I am sure they will. Thanks a whole lot. 
Thanks for being with us today. Some of our colleagues will 
have some follow up questions. We would just appreciate your 
responding promptly to those. Thank you very much, and thanks 
for your continued service.
    Good morning, one and all. We are happy you are here. We 
look forward to hearing from you. Thanks for taking time to 
join us today and to testify and respond to our questions.
    On the panel here today--we will start from my left, moving 
to the right. Fred Krupp, President, Environmental Defense 
Fund. Mr. Krupp, very nice to see you; welcome.
    Next we have John Corra, and John Corra is the Director of 
the Wyoming Department of Environmental Quality. We have a 
Wyoming in Delaware. A lot of times I say to my friends here, I 
was in Wyoming just this weekend. We also have an Atlanta, a 
Lebanon and all kinds of places. For a little State, we are 
pretty diverse.
    Next, Tisha Conoly Schuller, President and CEO of Colorado 
Oil and Gas Association. It is very nice to see you.
    Darren Smith, and Darren Smith is the Environmental Manager 
of Devon Energy Corporation. How are you today?
    And finally, last but not least, William Allison, the 
Director of the Air Pollution Control Division of the Colorado 
Department of Public Health and the Environment.
    Welcome, one and all. You have 5 minutes to make your 
statement. If you go much beyond that, we will have to rein you 
in.
    We are glad you are here, and we look forward to hearing 
what you have to say. Thank you for joining us.
    Mr. Krupp.

              STATEMENT OF FRED KRUPP, PRESIDENT, 
                   ENVIRONMENTAL DEFENSE FUND

    Mr. Krupp. Chairman Carper, Ranking Member Barrasso, and 
members of the Subcommittee, thank you for this opportunity to 
testify. My name is Fred Krupp, and I serve as President of the 
Environmental Defense Fund.
    In 2011 the Secretary of Energy asked that I serve on the 
Secretary of Energy's Advisory Board Natural Gas Subcommittee. 
The subcommittee was tasked with recommending measures to 
address the safety and environmental performance of natural 
gas, hydraulic fracturing from shale operations. During this 
service, I was fortunate to meet with policymakers, gas 
providers, environmental organizations, and hundreds of 
concerned citizens through a process of intensive fact 
gathering.
    The work was animated by two central considerations: the 
brisk expansion of shale gas and the imperative to address the 
public health and environmental impacts. The subcommittee 
encouraged adoption of rigorous standards for new and existing 
sources of methane, air toxics, ozone precursors, and other air 
pollutants from shale gas operations.
    Oil and natural gas operations emit volatile organic 
compounds and nitrogen oxides that contribute to smog; benzene, 
which is a known human carcinogen; and methane, which is a 
potent climate pollutant. We can measure these emissions in 
tons, but in a discussion that often focuses on numbers, we 
must not overlook their personal impacts.
    Last summer, along with the subcommittee, I spent time in 
Washington County, Pennsylvania. There a mother told us that 
she had left her farm because of the severe air pollution from 
shale gas. The problems had become so bad that her children 
were living with relatives, and she was living out of her car 
at the time.
    Our nation's clean air policies must reduce pollution, 
protect people, the environment, and communities. EPA's 
national emissions standards will cut air toxics, ozone 
precursors, and methane. The centerpiece of these protections 
is the requirement to require reduced emissions completions or 
green completions at hydraulically fractured wells. In a 
reduced emission completion, operators use separators to trap 
and capture natural gas that would otherwise be lost. This 
allows them to direct the gas to sales lines and ultimately to 
consumers that help offset their compliance costs.
    A number of companies are using this proven, cost effective 
technology now, and the States of Colorado and Wyoming have 
similar requirements. These States with historic natural gas 
and oil development have recognized the ill effects that 
uncontrolled emissions can have. Indeed, many of EPA's 
standards build on time tested requirements of Wyoming and 
Colorado.
    The natural gas industry in both States has continued to 
experience brisk growth while rigorous clean air standards 
similar to EPA's have been in place. When EPA finalized its 
standards, the National Journal headline read, ``EPA finds rare 
sweet spot on fracking rules,'' noting that the rule ``drew 
praise from both sides of the issue.''
    Indeed, EPA's new source performance standards were 
commended by diverse interests, such as the American Lung 
Association, the American Thoracic Society, the American 
Petroleum Institute, and Southwestern Energy. Southwestern 
emphasized the common sense nature, stating, ``What we do today 
with reduced emissions completions in our wells doesn't cost us 
any more than just venting the gas into the atmosphere.''
    EPA's common sense standard to reduce pollution can 
conserve a valuable domestic energy resource and in some cases 
save producers money. The standards limit ozone precursors and 
air toxics and as a co-benefit, methane emissions, a potent 
climate pollutant. Our nation must work together to build on 
these clean air measures. Solutions must include the adoption 
of rigorous emissions standards for existing sources and must 
address the methane leaks and discharges across the oil and gas 
system.
    Policy makers must provide leadership. The companies 
engaged in extraction activities must carry out solutions to 
protect our environment and our communities. Our nation's 
leading scientists must devote their expertise to providing 
answers to critical questions, and the voices of concerned 
citizens across our nation must be heard in forging lasting 
solutions.
    This is critical if our nation is to fulfill the 
President's promise in his State of the Union to develop 
natural gas without putting the health and safety of our 
citizens at risk.
    [The prepared statement of Mr. Krupp follows:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
  
    
    Senator Carper. All right, thanks so much.
    Mr. Corra.

             STATEMENT OF JOHN V. CORRA, DIRECTOR, 
          WYOMING DEPARTMENT OF ENVIRONMENTAL QUALITY

    Mr. Corra. Good morning, Mr. Chairman and Ranking Member 
Senator Barrasso. Thank you very much.
    My name is John Corra, and I am pleased to be here to talk 
to your Committee this morning. I want to thank you for the 
opportunity.
    Natural resources in Wyoming are both the how and the why 
we live there. We manage those resources consistent with the 
philosophy that mineral extraction and strong environmental 
protection go together. There are almost 36,000 oil and gas 
wells in the State, many of which have environmental controls 
mandated by our Department. These wells were once referred to 
in the Federal Clean Air Act as minor sources, and until 
recently, not subject to Federal regulation. Wyoming, however, 
had the foresight some 15 years ago to understand the 
importance of managing these oil and gas resources, and the 
recognition for strong air quality protection has evolved since 
then in our State.
    The industry has also shown leadership through innovation 
and experimentation which has led to our ability to raise the 
bar on emissions control technologies. The best example is the 
use of green completion technologies in areas of concentrated 
development. Over time, we learned that each producing oil and 
gas formation has a number of variables that bear on the level, 
extent, and need for emission control. Because of this, we have 
tailored our regulatory requirements. The technology as well, 
to recover oil and gas has continued to evolve, which has also 
resulted in the need for us to have flexibility in our State 
standards, which are based on location and density variables 
and geological conditions.
    We have in Wyoming created a three-tiered regulatory 
approach that recognizes the different intensities of 
development. The tightest regulation occurs in the Jonah and 
Pinedale area, where we have seen ozone exceedances due to 
intense natural gas development. Here, all new and modified 
wall pad equipment must be controlled upon startup to a 98 
percent removal of hazardous air pollutants. In areas of less 
concentrated development, we have emission thresholds for 
single wells that allow a short time after startup to get the 
controls in place in order to establish the operating 
characteristics of the well.
    Outside of these areas, we have State-wide requirements 
that have slightly different control thresholds. Green 
completions are also required where appropriate. Our State 
regulatory schemes can take these factors into account more 
readily than national rules.
    Our aggressive approach faltered, however, in the Upper 
Green River Basin in Sublette County, Wyoming. In 2008 we first 
saw exceedances of the ambient air quality ozone standard. What 
was unique about these occurrences was the time of the year: 
winter. Until then, ozone problems had only been associated 
with summertime conditions. We acted quickly to implement 
additional regulatory requirements.
    Even though we did observe ozone exceedances again in the 
winter of 2011, and have recently been classified as marginal 
non-attainment, the situation could have been worse. We 
developed tighter regulations, such as new permitting policies 
to require offsets of 1.1 tons of nitrogen oxides for every ton 
of emissions coming from the proposed action and also 1 and a 
half tons for every ton of volatile organics that might be 
coming from the proposed action. We have also been studying 
ways to foster voluntary reductions of those sources in 
existence prior to these new policies.
    Last, during the environmental impact statement development 
stage of that project, we also took advantage of our unique 
State relationship with the Bureau of Land Management, which 
resulted in a permitting system for drilling rigs.
    Although we have not solved our ozone challenges, I do 
believe we are closer to a solution. While the number of wells 
has increased substantially in that area since 2008, and gas 
production has gone up by 8.3 percent, we have been able to 
reduce emissions of VOCs by 21 percent and nitrogen oxides by 
17 percent. These notable results are a consequence of Wyoming 
being able to react quickly and to build upon an already 
established regulatory philosophy that was understood and 
accepted by the industry.
    Having the flexibility, authority, and autonomy to readily 
make changes to our regulatory scheme, partner with industry on 
voluntary measures, and develop policies for offset trading and 
banking are essential to our goal of solving that problem.
    The EPA regs are fairly close to ours, and we appreciate 
them patterning them. But we will see how they all work when we 
get into the implementation stage.
    This is a story about the speed and effectiveness of strong 
environmental regulations with the legislative support that we 
have had in our State, close working relationships with the 
regulated community, and recognition of local conditions and 
geology.
    In closing, I just would like to mention the flood of new 
regulations emanating from EPA. Since 2000 there have been 
hundreds of new rules that carry with them some level of State 
impact. In the air programs alone, there have been many rules 
just in the last several years. But funding and support for 
these efforts has not necessarily kept up. It has either 
remained flat or perhaps in some cases gone in the wrong 
direction.
    Mr. Chairman, that concludes my remarks. Thank you.
    [The prepared statement of Mr. Corra follows:]
    
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
   
       
    Senator Carper. Thank you. Great of you to come, thanks, 
Mr. Corra.
    Ms. Schuller, welcome. Please proceed.

              STATEMENT OF TISHA CONOLY SCHULLER, 
      PRESIDENT AND CEO, COLORADO OIL AND GAS ASSOCIATION

    Ms. Schuller. Mr. Chairman, members of the Subcommittee, I 
am Tisha Schuller. I am President and CEO of the Colorado Oil 
and Gas Association. Thank you for the opportunity to testify.
    Colorado is uniquely positioned to provide some input on 
this rule. We have a 100-year history of oil and gas 
development across the State, over 45,000 active wells, a 
strong commitment to environmental protection, and a unique 
collaborative style that brings together environmental groups, 
regulators, and industry.
    Colorado has some of the more protective air emissions 
regulations and controls in the country. There are two of 
particular relevance to this rule. The first is Colorado's 
Regulation Number 7 to reduce ozone precursors. This regulation 
is overseen by our State health department, the CDPHE. And it 
was adopted to reduce ozone precursors in the State's non-
attainment area. It also includes some State-wide requirements.
    The Wattenberg field is located in Weld County. In this one 
county in Colorado, there are over 18,000 active wells. This 
field is in non-attainment for ozone. As part of Regulation 7 
implementation, industry has invested over $40 million to 
install over 3,000 control devices. Even with increased 
drilling activity in this area, we know that there is a 
significant decrease in emissions.
    The second relevant regulation, in 2008, our State oil and 
gas commission, the COGCC, added a rule that reduced emissions 
completions, or green completions, to be used when technically 
and economically feasible. Where not feasible, best management 
practices to reduce emissions are required. The purpose of this 
rule was to encourage the capture of natural gas and reduce 
potential odors associated with well completion.
    We understand the EPA-based aspects of their rules on these 
two Colorado rules. As we have found in Colorado, there are 
positive aspects of the rules which promote conservation 
through the capture of natural gas and the resulting emissions 
reductions. In particular, Colorado air quality has benefited 
from the addition of low bleed pneumatic devices and the 
implementation of green completions.
    The remainder of my testimony will focus on what we have 
learned in Colorado's rules and how the regulations might be 
improved for effective implementation. We have three main 
concerns. The first is the emissions estimates. Academics, 
governments, and regulatory authorities around the world rely 
on EPA's natural gas emissions data to make policy and 
regulatory decisions. Two separate studies have concluded that 
the emissions estimates used in developing the rule were 
overestimated.
    This both results in an overstatement of the emissions 
reduction benefits of the rules and fuels controversies around 
the world about natural gas as a clean burning energy source. 
We hope that EPA will revise its emissions estimates with an 
analysis of the studies referenced in my written testimony.
    The second is compliance requirements. The monitoring, 
testing, and recordkeeping requirements associated with these 
rules threaten to undermine the economic benefits associated 
with increased natural gas recovery.
    One clear example is the requirement that flares be 
monitored by a person onsite for 3 hours every month. Several 
others are outlined in my written testimony. Overall, we 
recommend that EPA gather input from State agencies such as 
Colorado's and Wyoming's on how to streamline these 
requirements for practical implementation for both operators 
and State regulators. This component is critical to ensuring 
that the burdens of compliance don't negate the benefits of 
emissions reductions.
    And last, economics. The EPA has estimated there will be 
significant cost savings for the industry associated with these 
rules. We recommend that more effort is invested into 
validating the required costs and anticipated benefits in order 
to ensure that some requirements, such as green completions and 
low pressuring wells, or some of the compliance requirements, 
actually balance air emissions reductions with compliance 
costs.
    Our industry will work diligently with State regulators to 
continue to fully understand and address the requirements of 
this new rule. We hope that the published rule will allow for 
flexibility to encourage practical and pragmatic 
implementation.
    Thank you.
    [The prepared statement of Ms. Schuller follows:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
       Senator Carper. Thank you so much.
    Mr. Smith, please proceed.

STATEMENT OF DARREN SMITH, ENVIRONMENTAL MANAGER, DEVON ENERGY 
                          CORPORATION

    Mr. Smith. Mr. Chairman, members of the Subcommittee, thank 
you for the opportunity to be here today.
    My name is Darren Smith. I am the Environmental Manager for 
Devon Energy Corporation. Devon is a leading independent oil 
and gas producer. Our operations are onshore U.S. and Canada. 
Our company's portfolio of oil and gas properties delivers 
stable and economically responsible production for the nation.
    We work hard at Devon Energy every day to ensure that our 
operations are conducted in an environmentally responsible way. 
We aim to protect the air, water, land, and the communities 
that we operate in.
    It is important to note that Devon does support responsible 
regulations for our industry. However, we stand opposed to 
regulations that are unreasonable and regulations that are 
grounded in unsound science.
    My testimony today will focus on the misperception that EPA 
has on initial gas production from our industry. And I will 
describe how this misperception has resulted in a drastic 
overestimate of methane emissions from hydraulically fractured 
wells. We know that this overestimate has already been used to 
justify the regulations, more stringent regulations for our 
industry. But probably more troubling is this overestimate is 
finding itself into policy research that time and time again is 
resulting in the wrong conclusions about natural gas and its 
value for this nation.
    It was when research from Cornell University published 
their Natural Gas Is Dirtier Than Coal study that Devon first 
became aware of the fact that EPA had revised their mission 
estimate from hydraulically fractured wells. EPA now asserts, 
and I will add that it has also reported to the United Nations 
Intergovernmental Panel on Climate Change, that emissions from 
unconventional wells are in the neighborhood of 9 million 
standard cubic feet per well and interestingly that those 
emissions have been taking place since 1990.
    When we looked into the basis of this emission estimate 
change, we learned that EPA staff had relied on data reported 
to them from the Natural Gas Star program to create this new 
emission estimate, and this Natural Gas Star data really only 
came from three companies. That finding in itself probably 
describes the biggest flaw in EPA's method. Because very 
simply, the Natural Gas Star program is for operators to report 
gas captured, not gas emitted.
    And in fact the Natural Gas Star program was never designed 
to report emissions from our industry. It was to report the gas 
that was captured from our industry. That is an important 
point.
    Devon has worked hard over the last year or so to inform 
the EPA of this mistake and to provide them with the data that 
they could use to make the change necessary to this emission 
estimate. We have met with them face to face with our own data. 
We have provided them data from a large group of independent 
operators, such as Devon. We provided this data to them as part 
of the NSPS rulemaking docket. We have had e-mails, we have had 
telephone messages, we have worked relentlessly to help the EPA 
reverse their course and use actual data, proper data, and 
proper science in this rulemaking.
    We have also provided them reports from independent 
researchers that confirm our findings, and you will be 
interested to note that the Chamber of Commerce in the U.S., 
that represents over 3 million businesses here in the U.S., 
also has been involved and has asked for a request for change 
for this data based on the Data Quality Act.
    Despite all this, EPA fails to acknowledge the mistake and 
more importantly, fails to make the change necessary.
    I'd like to turn to the graphic that I provided to you in 
my testimony. I am going to have to do it very quickly, I just 
noticed my time. But essentially, this graphic is to describe 
kind of the air in an illustrated form.
    Essentially, when a well is hydraulically fractured it 
needs to flow back so that the gas can be produced from the 
well. Flowback here on the left hand side starts off with very 
low gas volume, as water is removed from the well, gas 
increases until it levels off here.
    EPA's perception of flowback is in the magnitude of 10 
days, because that is what is reported to them under the Gas 
Star program. A 10-day flowback results in 9 million standard 
cubic feet of gas released from a well.
    Now, if you contrast that with the situation where gas 
capture is not possible using green completion, we have 
provided data to EPA from operators that suggests that flowback 
when gas capture is not possible is only in the magnitude of 3 
and a half days. So if you can compare the gas volume assumed 
from the Natural Gas Star program versus the gas that is 
released when green completions aren't possible, you will see 
that there is a stunning discrepancy here.
    It is Devon's position that this factor needs to be changed 
and needs to be changed now. We have already seen that rules 
have been promulgated based on this bad science, and our 
concern again is that continued policy research is going in the 
wrong direction. We just recently have seen a study from our 
friends at EDF, Environmental Defense Fund, that suggests that 
gasoline vehicles are actually cleaner than compressed natural 
gas vehicles. And the foundation of these research findings is 
rooted in these bad estimates and this bad science.
    With that, I will conclude my testimony. Thank you.
    [The prepared statement of Mr. Smith follows:]
    
    
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
   
    
     
    Senator Carper. OK, thank you.
    Mr. Allison, please proceed. Welcome.

  STATEMENT OF WILLIAM C. ALLISON, V, DIRECTOR, AIR POLLUTION 
  CONTROL DIVISION, COLORADO DEPARTMENT OF PUBLIC HEALTH AND 
                          ENVIRONMENT

    Mr. Allison. Thank you.
    Good morning, Mr. Chairman, members of the Committee. I am 
Will Allison, Director of the Colorado Air Pollution Control 
Division. I want to thank you for this opportunity to provide 
our perspective on responsible oil and gas development.
    I am here today to offer comments supportive of EPA's 
recent rules and to discuss Colorado's own experience with oil 
and gas regulation. Hydraulic fracturing has been utilized in 
Colorado since the 1970s. It is now standard practice for 
virtually all oil and gas wells in Colorado and across much of 
the country.
    Today, Colorado has well over 45,000 active oil and gas 
wells. And we anticipate continued growth in this industry 
sector.
    In addition to our abundant oil and gas resources, Colorado 
also has a thriving recreation and tourist economy. Our clear 
streams, clean air, and abundant wildlife are essential to our 
economy and to our identity. Oil and gas are an important 
source of domestic energy for our State and our nation. The 
industry provides good paying jobs and needed tax revenues, and 
that is good news. Our job is to help ensure that oil and gas 
development does not result in bad news for public health and 
the environment, and to help strike a responsible balance 
between environmental protection and energy development.
    Colorado has been at the forefront of regulating oil and 
gas emissions for many years. EPA's new rules, as you heard, 
are largely based and built upon rules that have been 
successfully implemented in several oil and gas States, 
including Colorado. The oil and gas industry continues to 
thrive in Colorado under our comprehensive regulatory programs.
    EPA's rules will reduce emissions of such harmful 
pollutants as volatile organic compounds, sulfur dioxide, and 
air toxics such as benzene. The rules also have the co-benefit 
of reducing greenhouse gases, such as methane.
    EPA's rules promote proven technology and best practices 
that are already being used by many Colorado operators. 
Colorado supports EPA's efforts to provide cost effective 
emission reductions for the nation's oil and gas industry. We 
believe that the Federal rules will provide a level playing 
field and certainty to industry nationwide. States will retain 
the right to be more stringent than EPA rules if they desire.
    One of the central components that you have heard a lot 
today of EPA's rules is green or reduced emission completions. 
Green completions can significantly reduce emissions of air 
pollutants. The EPA has concluded that green completions are 
cost effective, and we agree. Colorado already has rules 
requiring green completions where technically and economically 
feasible. And many operators routinely utilize green 
completions on all of their wells within our State.
    Many Colorado operators also utilize other aspects and 
practices set forth in EPA's rules. This includes the use of no 
bleed or low bleed valves, which emit less air pollution than 
so-called high bleed valves. Switching the valves out is as 
simple as changing a spark plug. And we have found that the 
controls in EPA's rule are cost effective and that industry can 
recoup its costs as companies capture and then sell natural gas 
that would otherwise be vented to the atmosphere.
    EPA's rules are an important tool to complement the success 
and growth of America's oil and gas industry. Hundreds of 
thousands of oil and gas wells exist across the country, and 
EPA estimates that approximately 11,000 more wells will be 
hydraulically fractured each year. As thousands of additional 
wells are drilled, it is important to have cost effective 
emission controls in place to address the individual and 
cumulative impacts of these sources.
    For example, despite the tremendous growth of oil and gas 
emission sources in Colorado, with our regulations, over the 
past decade, we have seen decreases in the levels of many 
pollutants associated with oil and gas operations.
    As another example, many areas of this country, including 
the Denver metro area, are not currently meeting EPA's health 
based ozone standard. Oil and gas operations are a significant 
source of emissions that contribute to ozone formation. Sound 
and effective practices are thus important to our efforts to 
maintain and improve air quality while supporting a growing 
industry sector.
    We are increasingly hearing concerns about the potential 
impacts of oil and gas development on public health and the 
environment, including questions about emissions and odors. 
Comprehensive rules such as these are an important tool for 
addressing community concerns regarding the potential impacts 
of oil and gas operations.
    EPA's rules will place additional responsibilities upon 
State agencies already operating under tremendous resource 
constraints. We support continued and adequate funding to 
ensure that EPA and the States can effectively implement these 
regulations.
    In conclusion, Colorado supports these rules. The rules are 
an important step forward in our efforts to provide clean air 
while promoting economic growth. We will continue to look for 
opportunities and take appropriate action to ensure that our 
regulatory programs are protective, effective, and efficient.
    Thanks very much for the opportunity to speak with you 
today.
    [The prepared statement of Mr. Allison follows:]
    
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
 
    
        
    Senator Carper. Thanks so much, Mr. Allison.
    Senator Inhofe has asked to go first, and we are happy to 
say yes.
    Senator Inhofe. I appreciate that very much, Mr. Chairman.
    I am delighted to have Darren Smith here witnessing today. 
I am very familiar with Devon, with Larry Nichols, and your 
whole operation, how sensitive you have always been, 
historically, to environmental issues.
    Let me ask you just a couple of questions here. Devon's 
projected emissions from the EPA air rules have been 
overestimated by as much as 1,400 percent. In addition, a study 
was put together by API and ANGA, and they came out with the 
overestimation also of primarily methane.
    Now, they didn't come exactly to the same number 
conclusion. Can you tell me how both of you were right, or were 
both of you right on this estimate?
    Mr. Smith. Sure, thank you.
    There does seem to be a disagreement in the numbers. But I 
think it can be described this way. The API study looked at two 
categories of emissions, separate from the work that we have 
done. They recognized that when you combine overestimates in 
these two categories, it actually lowers the EPA emissions by a 
half.
    Our work was specifically around completion emissions. And 
what we have demonstrated is that EPA's emission factor for 
completions was several factors too high. So you can think of 
these two studies as complementary. But they basically describe 
different categories of emissions from the industry.
    Senator Inhofe. OK, that makes sense.
    Now, in your testimony you estimate that Devon has lost 
more than $40 million to the atmosphere under the EPA's 
analysis. Can you explain how you arrive at that number and how 
Devon and other companies can justify losing that much of their 
product?
    Mr. Smith. Sure. The calculation is real simple. We look at 
the number of wells that we drill and hydraulically fracture. 
Then we couple that with the volume of gas that EPA claims we 
are losing per well, and then we factor that with the gas price 
to come up with $40 million. So that is a large number, and 
clearly, companies successful as Devon certainly can tolerate 
that level of waste.
    Senator Inhofe. I see. And I wanted to ask you also about 
Wise County, Texas. That is the Dallas-Fort Worth area. That is 
in Region 6. It became a little bit famous with all the crucify 
comments and all that, with Armendariz. They recently have 
found that they are out of attainment. What I would like to ask 
you, could their being out of attainment be based on faulty 
science? And can you explain how the EPA arrived at its 
decision and the potential impact the decision could have in 
other areas?
    Mr. Smith. Sure. We do believe that EPA's decision to 
include Wise County as ozone non-attainment is not based on 
good science, and I can describe that. First of all, there is 
no ozone monitor in Wise County, so EPA's decision to include 
it as a non-attainment county comes from the concept of its 
contribution to non-attainment.
    Senator Inhofe. You say there is no monitor in Wise County?
    Mr. Smith. There is no ozone monitor in Wise County. That 
is correct. So again, EPA's decision to include it as an ozone 
non-attainment county comes from its belief that it is a 
contributor to non-attainment downwind. Interestingly enough, 
the winds in this part of Texas don't blow in such a way that 
emissions in Wise County could contribute downwind to ozone 
problems in other counties. The wind only blows in that 
direction that would be needed to transport pollutants into 
non-attainment areas only 2 percent of the time.
    So what we have seen with EPA is that they have taken a 
what we kind of regard as a sub-microscopic approach to try and 
find some evidence to link the emissions in Wise County to non-
attainment elsewhere. They have employed a back-trajectory 
model that really has only demonstrated that winds come from 
Wise County to a non-attainment area only twice in 3 years, and 
in fact, on one of those occasions the winds never did 
originate in Wise County. They originated in a non-attainment 
county, circled through Wise County, and then landed back in a 
non-attainment county.
    And the other thing I need to emphasize is that model that 
they employed, that was not employed by any other EPA region in 
the nation. In fact, other EPA regions have discredited it 
because it is not reliable. The model that they used in no way 
makes a connection between emissions in one area and ozone 
formation in another. You may know that ozone formation is a 
complicated photochemical process, and simply just by looking 
at some sort of wind direction is by no means some evidence 
that Wise County is contributing to ozone problems.
    Senator Inhofe. That is of particular interest to me, since 
my State of Oklahoma is downwind from Wise County. So I 
appreciate that very much, and thank you for your testimony.
    Senator Carper. Senator Barrasso.
    Senator Barrasso. Thank you, Mr. Chairman.
    Mr. Corra, you talk in your written testimony about 
philosophy, manage resources consistent with the philosophy 
that mineral extraction and environmental protection can exist 
together in harmony. Is that the philosophy you see coming out 
of this Administration? How do you see their approach?
    Mr. Corra. Mr. Chairman and Senator Barrasso, in the case 
of the oil and gas regulations, we were quite pleased to see 
that the Administration spent time in the State to learn how we 
did that and to look at that.
    As we see in our State, we regulate coal mining, for 
example, to a very, very high standard. We also follow the 
Administration's rules with regard to best available control 
technology on all the new sources of air pollution.
    A lot of rules have come through in the last year or so 
that we are still trying to process and see how they fit in to 
our regulatory scheme. We do like to say that we are regulatory 
partners with the EPA. We do appreciate the fact that they 
consulted with us on the natural gas standards.
    Senator Barrasso. You also talk about the flexibility of 
local versus national rules. And I wonder what the impacts to 
State like Wyoming, if the Federal Government steps in to 
regulate, where States like Wyoming are already doing the job 
of regulating at home.
    Mr. Corra. Mr. Chairman, in the case of oil and gas in 
Wyoming, and I will talk about our non-attainment area in 
Sublette County, is a good example. The ability that we have to 
implement policies and have agreement on those policies with 
rules to follow later has been essential for us to act swiftly. 
We have already started on a planning process and implementing 
and making decisions well before we needed to develop any State 
implementation plan, for example, with the Federal Government.
    The local conditions cannot be overstated, quite frankly, 
in our area, both from a standpoint of geology as well as from 
the standpoint of surface topography. These problems are very 
unique to all those circumstances. And we are generally in a 
pretty good position to determine what the appropriate 
regulation should be.
    Senator Barrasso. Thank you.
    Mr. Smith, you stated in your written testimony that the 
error in the way the EPA calculates emissions from natural gas 
emissions isn't corrected, I think you quoted, it will continue 
to fuel bad public policy and research that overshadows the 
benefits of natural gas. If you would elaborate a little bit on 
that point. Will the EPA's flawed data lead to less natural gas 
production?
    Mr. Smith. Certainly. What we are seeing is that when 
different fuels are compared on a life cycle analysis basis 
that this over-estimate of emissions from the completion stage 
of natural gas wells tends to tip the balance such that there 
have been arguments that things like coal, for instance, on a 
life cycle basis, are in fact cleaner than natural gas. To us, 
those conclusions are absurd.
    But what that essentially could mean is that the advocacy 
for natural gas and the recognition of natural gas to improve 
air quality and to be a bridge fuel is being damaged. We are 
also seeing some studies that suggest that even compressed 
natural gas vehicles are maybe no cleaner than gasoline.
    And then also we have seen that this data is spread to our 
partners in the European area. So that is damaging the 
reputation of natural gas in those areas as well.
    Senator Barrasso. What is your response, then, to the 
Sierra Club's Beyond Natural Gas campaign?
    Mr. Smith. I would say that, I don't know exactly what is 
beyond natural gas, I am not sure anybody here knows what is 
beyond natural gas. But if there is something beyond natural 
gas, then I guess we really don't know what that is. We firmly 
believe that natural gas needs to be part of the solution, 
particularly as we see more and more pressure put on coal, coal 
plants shutting down. Really, what is the other option? What is 
the other fuel source? It is a real mystery to us.
    Senator Barrasso. OK, thank you.
    Thank you, Mr. Chairman.
    Senator Carper. Senator Sessions.
    Senator Sessions. Thank you, Mr. Chairman, for your 
courtesy.
    Senator Carper. You are welcome.
    Senator Sessions. Mr. Allison says that you can fix this 
problem, Mr. Smith, we will go to you, with a small cost and 
can recoup that cost from the energy captured. And I believe 
the fact sheet from EPA says that their regulations are highly 
cost effective. And how would you respond to that? Is it going 
to be a net cost? What do you think it would be?
    Mr. Smith. Sir, you will recognize that statements around 
cost effectiveness rely on the volume of gas captured. Of 
course, if the volume of gas captured is overestimated, then 
you can understand that the economics that are claimed for the 
benefit of this are also overestimated.
    Senator Sessions. Is the technology such that you wouldn't 
flare the gas that is being now lost, presumably? You would 
actually capture it and put it in your pipeline?
    Mr. Smith. I would say that----
    Senator Sessions. Is that what they are talking about 
doing, technologically?
    Mr. Smith. That technology is common, as has been said 
numerous times. It has happened voluntarily. But I would like 
you to think about it more as a process that helps operators 
improve the quality of their wells, rather than to avoid 
emissions, because operators do know that the emissions from 
cases where we cannot green complete are small and overstated 
by the EPA. So companies like Devon, we employ green technology 
or green completion technology, again, not so much as an 
emission avoidance opportunity.
    But what this temporary equipment really allows us to do is 
clean up our wells, clean them up longer, and capture the gas 
as it is happening. So we can clean up our wells without any 
wasted gas.
    It also allows us some operational flexibility. Because as 
I described quickly in my exhibit, that flowback brings a high 
fluid volume back initially in the well. You have one or two 
choices. You can construct permanent facilities----
    Senator Sessions. So you can do this, you agree with him 
that it is being done, you are doing it in some cases. But what 
is it, what situation is it explicitly you can just simply tell 
us that you don't think it is smart to do that uses this 
process? What kind of situations do not work?
    Mr. Smith. Instances where this situation doesn't work is 
where there is no infrastructure available to capture the gas. 
And I will say that the new NSPS rule that EPA is finalizing 
has language in there that is problematic for operators that 
are developing in new areas. For instance, for Devon, we have 
leases in Ohio, and we are developing those. There is some 
suggestion in this rule that subsequent wells after exploration 
wells, we will not be able to operate without green completion.
    I am just telling you that our operations are such that 
when we drill exploration wells, they are sometimes counties 
apart. So there are a lot of other ornaments in this rule, on 
the tree of this rule, if you will, that are problematic, one 
of which is our ability to develop new shale resources.
    Senator Sessions. I think that developing undeveloped 
fields might be a basis for a legitimate concern there for you. 
Mr. Allison, you were saying that it would capture--this energy 
would pay for itself. Do you have documentation to show that? 
Are you using EPA estimated numbers to conclude that it would 
pay for itself?
    Mr. Allison. Thank you, Senator. We have several years of 
rules on the books in Colorado where green completions are 
required, where economically and technologically feasible. 
While we don't have hard data, we estimate that approximately 
85 percent of our operators use green completions on a regular 
basis and on those wells. So it is clearly cost effective for 
them.
    Senator Sessions. They are doing it voluntarily or because 
you require it?
    Mr. Allison. We have regulations on the books that were 
adopted after----
    Senator Sessions. But do you have any scientific proof that 
it pays for itself?
    Mr. Allison. Again, our industry worked with us on these 
rules that were adopted with widespread support. We are 
fortunate to have leaders in our State, in the industry, who 
tell us that we do this on a regular basis, it makes sense for 
our company, we recoup our costs. We capture not only the 
emissions but the sand, the liquids, the other things that come 
up during the flowback process. And they are able to re-use a 
lot of that material.
    Senator Sessions. My time is up. Would you think that--does 
your regulation allow for an exploratory well in an area that 
does not yet have infrastructure? Do you have any exceptions 
for hardship type cases?
    Mr. Allison. Thank you, Senator. There are exceptions, for 
example, where there is not adequate pressure or wildcat or 
delineation well, yes.
    Senator Sessions. Thank you, Mr. Chairman. My time has 
passed.
    Senator Carper. Let me ask you a couple questions, and then 
we will wrap it up.
    One, Mr. Smith has mentioned, I think, and some others in 
the industry have asserted that EPA has overestimated the 
emissions. I just would ask, Mr. Krupp, do you have any 
thoughts you would like to say with respect to the concerns Mr. 
Smith has raised?
    Mr. Krupp. I think the EPA used the best available data to 
calculate their estimates. At the same time, the EPA is well 
aware that right now, emissions are causing pollution and 
hurting people. It is urgent that we get rules in place to 
reduce emissions.
    I would agree that all the estimates referred to are no 
substitute for empirical data. That is why the Environmental 
Defense Fund, in cooperation with the University of Texas and 
other industry partners, are out in the field collecting 
empirical data. But having said that, I am very confident that 
EPA's data is the best available estimates and that they have 
good reason to want to urgently get things done now that reduce 
the emissions.
    Senator Carper. Any other witnesses want to react to the 
concerns raised by Mr. Smith? Anybody else?
    OK.
    Ms. Schuller and Mr. Allison, given your experiences, do 
you think that EPA has given enough flexibility and time to 
producers to meet the new clean air standards, and what would 
you have maybe done differently had you been where EPA had?
    Ms. Schuller. Senator, first I would like to acknowledge 
that in the final rule, EPA did make some significant changes 
that acknowledged industry concerns. There are still quite a 
few considerations that still need to be taken into account. 
The tank emissions requirements industry estimates will require 
3 years. Based on the estimates we think there will be over 
28,000 tanks. The emissions control devices aren't currently 
being manufactured. So that is an example of one area that will 
require more time.
    In terms of what we would do differently next time, in 
Colorado we spend a lot of time partnering with our regulators 
to understand the technical considerations and the logistical 
requirements of implementation. I think the emissions estimates 
and the estimated costs are examples of things in this rule 
that could be significantly improved. And they are important 
because they dictate where the thresholds are for 
implementation and how stringent and onerous compliance 
requirements should be. So those are things we would do 
differently.
    Senator Carper. OK. At the end of the day, though, do you 
believe that industry can meet the standards that are laid out 
for them by EPA?
    Ms. Schuller. Industry can meet the majority of them. But 
there will be some constraints around manufacturing and 
implementation that are going to be quite challenging.
    Senator Carper. OK, thank you.
    If I could, do you want to say anything on that, Mr. 
Allison?
    Mr. Allison. Thank you, Senator Carper. I guess I would 
just add that I would agree there is uncertainty in any 
emission estimates. We welcome actual data, empirical data over 
estimates whenever possible. Ms. Schuller alluded to some 
studies that suggesting that emissions are overestimated. There 
are other studies out there suggesting that emissions are 
underestimated.
    Regardless of what the right number is, we think that these 
controls have demonstrated effective reductions in air 
pollution. We welcome ongoing studies such as alluded to by Mr. 
Krupp that would provide more empirical data on actual 
emissions at the well site.
    Senator Carper. OK, thanks.
    Mr. Corra, Senator Barrasso mentioned to me earlier in the 
hearing that you were appointed by a Democrat in your State. 
Who appointed you?
    Mr. Corra. Mr. Chairman, Governor Dave Friedenthal in 2003.
    Senator Carper. All right, good. A question if I could for 
you, sir. You come from a State that has implemented similar 
clean air standards, similar to what the EPA has proposed. It 
sounds from your testimony today that since implementing your 
State standards that you have seen some positive impacts on air 
quality. Is that true?
    Mr. Corra. Mr. Chairman, it is true. Where we are keeping 
detailed records in this Upper Green River Basin, where we have 
the non-attainment for ozone, we have seen reductions. And in 
fact, there have been, since 2008, when we began an aggressive 
program to add regulations to that industry there, the number 
of oil and gas wells has grown substantially. Gas production 
has grown, and we have seen a corresponding decrease in the 
precursor emissions that form ozone, namely nitrogen oxides and 
volatile organic compounds.
    So our inventories continue to get better every year, and 
we continue to find other targets. We like the other States 
regulate a lot of the different component operations of these 
fields, pneumatic controllers, for example, tanks. But we are 
not sure we are there yet because of the unique weather 
conditions. But we have made good progress.
    Senator Carper. OK, good. I want to wrap it up here in the 
next couple of minutes. Sometimes we have a diverse panel and 
we have issues such as clean air issues where there is a lot of 
disagreement. There is less so here. And that is a good thing, 
I think EPA Has done a nice job reaching out to the States, 
trying to learn from the States. It is reflected in the work 
and the testimony that we have heard.
    That isn't to say what they have done is perfect. One of my 
admonitions from a child growing was, if it isn't perfect, make 
it better. I still try, everything I do, I can do better. I 
think the same is true of all of us and of agencies like the 
EPA.
    But if it isn't perfect, make it better, do each of you 
want to give like maybe one quick idea, quick idea as to 
something that is not perfect that EPA and we might want to 
make better going forward?
    Mr. Krupp.
    Mr. Krupp. This rule only applies to new wells that are 
being constructed. There is a vast preponderance of gas that is 
being pumped from existing wells through infrastructure that is 
existing. Making it better would mean having standards applying 
to existing wells and existing infrastructure.
    Senator Carper. OK, thank you.
    Mr. Corra.
    Mr. Corra. Mr. Chairman, I think to make things better is 
to just, you cannot overemphasize the importance of allowing 
States to have the flexibility to implement these according to 
the conditions in their own States. So I would hope that going 
forward there aren't a lot of other changes that are made. I 
think the implementation of the rule, how this thing evolves, 
other sorts of things that just seem to occur naturally, that 
follow new regulations, I would hope that EPA stays the course. 
They have said that they want to defer to the States, and that 
would make things a lot better, if they held to that promise.
    Senator Carper. OK, good, thanks.
    Ms. Schuller.
    Ms. Schuller. Mr. Chairman, the rules have compliance 
requirements similar to those for major sources. Most oil and 
gas operations are remote and quite dispersed. In order for the 
rules to live up to their promise of being effective, I think 
the compliance requirements need to be modified to ensure that 
operators can adapt to them effectively.
    Senator Carper. OK, thanks.
    Mr. Smith.
    Mr. Smith. Mr. Chairman, I would suggest that there should 
be a critical review of the value add for new rules and to 
ensure that credible science is used to develop them. Many of 
these rules are promulgated, but we have just talked about one 
element of the rule here today, and we focused on green 
completions and those sorts of things.
    But there are many other facets of this rule. I will 
suggest that the no value add, high cost component of this rule 
is the administrative piece, the recordkeeping and the 
reporting, those are the sorts of no value add, real cost 
impacts to operators like Devon. Those come out of our bottom 
line, those result in fewer wells drilled.
    Senator Carper. OK, thanks.
    Mr. Allison.
    Mr. Allison. Thank you, Mr. Chairman. I think these rule 
are an important step forward. I would note that they apply 
only to gas wells. And there are areas of the country where a 
lot of oil is being produced right now. In the process of that, 
a lot of gas is being burned off. That seems counterintuitive, 
as you heard today, when gas is such an important part of our 
domestic energy. So I would suggest that EPA wants to take a 
look at that and work hard with industry and States and other 
stakeholders to see what might be appropriate steps to take 
with respect to that.
    I guess I would also say in closing that it is important, 
with this rule or any other EPA rules, for States to have 
adequate flexibility and for us to be able to take into account 
the unique atmospheric and aquatic and geologic resources 
within each State as we implement these rules.
    Senator Carper. All right. Those are helpful comments and 
we appreciate those. And in the spirit of if it isn't perfect, 
make it better, there are obviously some ways to make this 
better.
    One of the things that my dad used to try to impress on my 
sister and me when we were children growing up, I was reminded 
of this on Father's Day, kind of reflecting, one of the things 
that he always reminded us of, just to use some common sense. 
My sister and I were kid and we must not have had very much, 
because he said every other day, just use some common sense. He 
didn't say it that nicely. He was an old chief petty officer in 
the Navy, tough as nails.
    So believe it or not, after all those years of having it 
pounded it into my brain, I try to use common sense. And I 
encourage Federal agencies to do the same. And I am encouraged 
in this case that EPA has used a fair measure of that. We have 
these emissions that have value and that can be harnessed 
rather than just flared. I think EPA and the industry are 
trying to find a way to use the value of those gases, rather 
than just flare them and pollute the air, why don't we capture 
them and use them commercially, economically. It makes a lot of 
sense. My dad would say, they are using some common sense down 
there. And we are certainly trying to.
    I thank you all. I thank our colleagues for coming today 
and preparing today and responding to our questions. Some of us 
will have some further questions to ask for the record. Our 
colleagues have 2 weeks to provide those questions. We would 
just ask that you respond to them as promptly as you can.
    With that having been said, Senator Barrasso, I think it is 
a wrap. Thank you all. We are dismissed.
    [Whereupon, at 12:18 p.m., the Committee was adjourned.]

                                 [all]