Way back when Dick Cheney was Vice President, and the Bush administration was holding private meetings to draft our energy policy, the Halliburton Loophole was devised to specifically exempt the oil and gas industry from the requirements of the Clean Air and Clean Water Acts.  Absent this exemption, the federal government would have been much more actively involved in monitoring and regulating the air and water pollution associated with modern shale gas drilling and fracking.

Congress passed the Halliburton Loophole, which allowed the unregulated and very rapid development of what became known as the Shale Gas Revolution.  However, the Bush administration did not propose, and Congress did not pass, laws exempting the agencies of the Federal Government from following their own regulations requiring environmental review.  NEPA, the National Environmental Policy Act, still applies.  Wikipedia has a succinct statement of its requirements:

NEPA’s most significant effect was to set up procedural requirements for all federal governmentagencies to prepare Environmental Assessments (EAs) and Environmental Impact Statements (EISs). EAs and EISs contain statements of the environmental effects of proposed federal agency actions.[2] NEPA’s procedural requirements apply to all federal agencies in the executive branch.”

The New York Times has published another article by investigative reporter Ian Urbina, in which he documents that federal officials within the USDA have asked for clarification of the requirements of NEPA in relation to the issuing of mortgages on properties that have gas leases on them.

Over the last year, some banks and federal agencies have started revisiting their lending policies to account for the potential impact of drilling on property values.

“We will no longer be financing homes with gas leases,” Jennifer Jackson, program director for rural loans in the Agriculture Department’s New York office, wrote in an internal e-mail this month, citing several factors, including the costs of conducting such reviews.

In e-mails sent to landowners and Congress, agriculture officials said that environmental specialists at the agency believed that the reviews were legally necessary and that leased properties should not be given special exemptions. But when asked about the notice, the Agriculture Department said its secretary, Tom Vilsack, is still reviewing it.

There is some concern that the Obama administration may try to influence the USDA’s professional staff due to their political interest in continuing to show an optimistic projection about the “Shale Gas Revolution.”

The conversation about the need for NEPA reviews when the government agency action taken is the provision of a mortgage may also spread to other governmental agencies that deal in much larger numbers of mortgages than the USDA, such as Fannie Mae and Freddie Mac.  The issue is, on its surface, a matter of defending against potential lawsuits that the government failed to obey its own rules.  However, beneath the surface, the issue reflects a much larger question.  The Federal Government, through its agencies, guarantees an enormous number of mortgages.  If a relatively wide-spread practice, like fracking for gas, is found to cause environmental damages, who gets sued?  Homeowners don’t typically have deep pockets, and the gas development limited liability partnerships and joint ventures that own most gas leases can go bankrupt lickety-split.  Does the taxpayer ultimately hold the bag if large numbers of homes become unsaleable?

“There is substantial controversy over the extent, range, and issues associated with hydraulic fracturing (fracking) for gas,” Mr. Bailey wrote in a March 8 e-mail to members of Congress, adding that “for a number of years” the loan program typically had considered its mortgages exempt from environmental review. But the agency notice will clarify that this is not the case for properties with drilling leases.

Requiring environmental reviews for such properties will be slow but will allow the public to have more say in the matter, he added.

“Approval of such leases would allow for a number of potential impacts to possibly occur which would need to be analyzed in a NEPA document that would be reviewed by the public for sufficiency,” he wrote.

“The overall environmental effects of such development have not been addressed in any NEPA document by any federal agency,” he said, adding that allowing people with drilling leases on their properties to qualify automatically for mortgages from the Agriculture Department “places the Agency at risk of NEPA related litigation.”

A NEPA review would allow a national-level discussion similar to the one that we just concluded in the State of New York, with experts and the public offering testimony related to the DEC’s dSGEIS.

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